Will oil bound back to US$ 50 as Russia and Saudi might close a deal?

Following a global crisis that hit mainly since March ‘20, but started from February due to Coronavirus Pandemic and its measures taken in order to reduce its rapid spread. It had resulted in the world economies together with global financial markets extreme volatility conditions and intense crash as Millions of people kept out of work, schools, public places, while businesses remain closed.

Pandemic rapidly influenced not only human lives but supplies and of course sharply affecting Oil due to a massive drop in its demand that fallen to its lowest rates.

What is Oil Production War?

Eventually Oil Production War took place as a result of a misunderstanding between the OPEC (Organization of the Petroleum Exporting Countries) and Russia, also affected by the Stock crash and global uncertainty conditions caused by the Coronavirus.

Due to lockdowns and snoozed businesses the decrease in world oil demand over 30%, so OPEC proposed to cut production and balance economic crisis with international support and agreement on prices of total value and of course production.

However, Saudi Arabia made a decision not to support crude oil prices and was ready to sell off a great volume of cheap oil, resulting in a shift of oil futures, besides the negative effect of Pandemic reaction. Together mainly affecting world-leading producers Russia and the US along with the Saudi Arabia that uses the case of drop in prices to increase its own production, obviously hitting its main competitors.

Consequently, OPEC had to urgently take measures, call a summit and find a solution on how to balance supply and demand together with the partnership between the suppliers or world countries and prevent even bigger price fall.

What is the current situation?

Last week’s oil saw largest falls and afterward gains in the history of oil trading, on such making an Oil rally looking now for some stability and recovery after the rapid fall due to COVID-19 conditions and price war around. Recent situation awaiting OPEC meeting and production compromise between Russia and Saudi Arabia that might close a deal.

At the moment opinions, of course, divided, while some analytics and traders are looking on a positive side from the deal that tends to bring kind of relief to Oil supply. As Oil storing becoming an issue as well, since simply there are thousands of tankers full of oil waiting for offload and keeping the same production level may cause fall of the prices even more. Also besides the story that US Oil production using more cost-wise technology to extract Crude Oil that can affect the price to go even below unless the agreement is reached.

And another group is quite pessimistic about the upcoming announcements since the reduction of supply hitting forecasts and requires to rebalance of the budgets, which is one of the crucial points under uncertain economic conditions and crises. Needless to mention that is beside to “stubborn” decisions that the party or another may take taking into consideration only its own interests.

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Will oil see US$50 again?

Preceding the dramatic change of the situation and the fall to low $20 US oil probably will bounce back to its 50$ levels. However, following anxious positivism and its impact on the rising market with hopes towards an agreement between Russia and Saudi Arabia which we saw a week ago. The news to be followed, so the prices would go back to $50 by the end of the year in case demand will grow this year which still looks unachievable at the moment due to the Coronavirus outbreak.

Besides OPEC efforts and frustration to go negative, oil crash also impacting shale patch as the demand continues destruction causing many pain with the next months to follow. Definitely, the US, Saudi Arabia and Russia oil industry will suffer while OPEC mentions “international deal must get done, as it will ensure economic stability and recovery from COVID-19”.

How to trade Oil?

In current extremely volatile conditions, you definitely should be very cautious while making any trading decisions. It is not recommended for beginning traders or less experienced ones to trade in general right now, as nowadays risks are so high that you may face negative effects within a blink of an eye, which makes trading almost gambling activity.

Besides if you still adjust your strategy to trading these days, check on the conditions of the broker you use for your trading activity, as world Exchanges and Regulated Brokers apply some restrictions on trading or use of tools, alike high leverage trading.

Along with high precautions and risk management measures, you should always apply, trading under high volatility and measure news releases should be strictly aligned to your trading strategy giving preference to daytrading. As long term trading under uncertainty conditions making things much harder for any trading performance with no matter how good you are.

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