Oil prices may get worse before they get better
It took long enough, but the bearish view on oil finally prevailed, as I predicted a month or two ago. Oil has been in a steep decline due to a combination of bearish inventory data, cooling geopolitical tensions, competition from alternative energy, and weakened demand due to Coronavirus.
The virus's spread slowed somewhat yesterday, but it remains to be seen whether that's just a blip. In the meantime, its impact on transportation and shipping has grown in the last 24 hours, with the quarantine of a cruise ship and talk of travel bans to affected countries. There's also been no sign of improvement in inventory numbers. The EIA forecasts that crude inventories will rise through about May, and then will begin to fall in the back half of the year.
Oil has some support at the current level, and may see a small technical rally from here. However, I'd stay out or short on oil for the foreseeable future, because there's a good chance this support won't hold in the current news environment for oil.
The virus's spread slowed somewhat yesterday, but it remains to be seen whether that's just a blip. In the meantime, its impact on transportation and shipping has grown in the last 24 hours, with the quarantine of a cruise ship and talk of travel bans to affected countries. There's also been no sign of improvement in inventory numbers. The EIA forecasts that crude inventories will rise through about May, and then will begin to fall in the back half of the year.
Oil has some support at the current level, and may see a small technical rally from here. However, I'd stay out or short on oil for the foreseeable future, because there's a good chance this support won't hold in the current news environment for oil.
