This website uses cookies to provide you with full functionality and the best possible user experience. By continuing to use this website you agree to our cookies policy. Find out more. Close

Crude Hits New 2017 Low… But Are Investors Too Pessimistic?

by Fawad Razaqzada

The price of crude oil has hit its lowest level this year. Brent fell below $46 and WTI took out $44 a barrel this morning. Crude prices thus breached the lows that had been established prior to the last OPEC meeting, in which the not-so-effective oil cartel agreed with Russia to extend the deal to limit crude production into the first quarter of 2018.

The lack of a positive response in oil prices clearly suggest market participants are not convinced that the OPEC’s efforts will help shore up prices in a meaningful way in the short-term as shale supply continues to rise in the US. Last week’s news of a rise in US crude production and an unexpected build in gasoline stocks only helped to exacerbate those fears. We will have to see how the supply situation has changed in the latest week and how it evolves over time. Supply data for the week ending June 16 from the American Petroleum Institute (API) will be released tonight ahead of the official figures from Energy Information Administration (EIA) tomorrow. Unless we see a marked reduction in crude stockpiles, the possibility of further short term falls in the price of oil cannot be ruled out. In the slightly longer-term outlook however, I expect the price of oil to regain its poise again. Although not very effective yet, the impact of the OPEC’s deal with Russia will take time to filter through. As the global disparity between demand for and supply of oil reduces in the coming months, prices should begin to recover.

The other trouble with oil is that at the moment sentiment is still quite bearish and traders seem happy to keep selling into every rally. The key questions therefore are: when will this trend end, and how low oil prices could go before it rebounds? The answer to both is simple: no one knows. But with most of the negativity in the price by now, I would say “soon” and “not very much.” As such, I am half expecting this latest breakdown of a prior support, in the case Brent at $46.75, to be a false move. If this turns out to be the case, then we could see a sharp short-squeeze rally to ensue once the broken level ($46.75) is reclaimed and price makes a short-term higher high (in this case above $47.70). However, for now, that is just a potential scenario. We may very easily see further declines before oil prices stabilise.


From time to time, 2021 StoneX Financial Ltd’s (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

Don't have an account?

Got some trading ideas?

Make the most of any trading opportunity

Log in and Trade

Contact us: