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Crude oil is trading at $58 near its Jan 2020 lows, when will it rally?


Simon Mugo

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The West Texas Intermediate (WTI) crude oil basked has been falling since the start of 2020 with the exception of a brief spikes higher at the start of the year. However, the WTI has been trading above the 200-day SMA, which is used by most traders to determine whether an asset is in a long-term uptrend or downtrend. Therefore, judging by this popular definition, the long-term outlook on crude oil was still bullish despite the decline witnessed in January. The WTI crossed below its 200-day SMA today and the daily candle is likely to close below this crucial indicator, which shifts the long-term outlook from bullish to bearish.

However, we cannot rule out a rally in oil price if the fundamental picture changes significantly driven by reduced crude oil supply and rising demand for the commodity. Currently, oil demand is not rising at a fast clip given the sluggish economic growth being witnessed across most major economies. Some major oil  producers are also ramping up production, especially the US, which is now a net crude oil exporter leading to an oversupply of the commodity. While a long-term rally may seem unlikely, there are usually multiple short-term rallies during long-term bearish trends.

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For that I think you have to look at the macros behind it, as the above reply suggests. If there are any supply issues from Saudi or even somewhere like Libya then we should see oil start to rally once more. Keep a watch on the Libya situation and if there are any potential production issues. 

Another thing to watch would be the US and Iran situation. Any further escalations there will for sure see oil rally. 

Thats my macro view anyway ?

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