Oil holds below $60: demand likely down, supply upSince the announcement of higher than expected new American tariffs, especially on China, oil’s decline has been dramatic. The very high tariffs on China are important because China is the largest importer of oil, so economic headwinds there usually have a significant effect on demand. OPEC+ decided last week to increase supply next month.
4 April was American light oil’s lowest weekly close since August 2021, so it’s difficult to estimate the next potential support. The 78.6% monthly Fibonacci retracement is around $40, but even in the circumstances that’s a very long way from where the price is now. The unusual strength of the oversold signal and the size of recent candlesticks call into question whether the price might continue immediately lower unless significant fresh trade news reaches markets.
Equally, buying oil now looks like trying to ‘catch the knife’. Fundamentals are quite strongly negative and 7 April’s failed bounce suggests that demand is likely to remain low for some time unless there’s another round of strong losses or the tone of the news changes. Short-term trading of retracements seems to be the least bad option now.
This is my personal opinion, not the opinion of Exness. This is not a recommendation to trade.
