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Oil’s New-Old Low

One of the assets that caught worldwide traders’ attention, especially during the past few weeks, is the Black Gold. Amid an ongoing COVID-19 pandemic, OPEC+ disagreements, and further demand pressures, Oil managed to reach a historic low it hadn’t seen for the past 18 years, at less than $20/barrel. What you should keep in mind is that Oil’s situation is not unprecedented.

Before you proceed to further analyse Oil’s current situation, let’s first see what exactly pushed its prices to reach $20 18 years ago. We’ll analyse which were the main factors impacting it, and how they managed to influence Oil in such a manner.

First off, you should know that back in early 2002, the US economy was in a completely different situation than the one in which it’s now – in the middle of a global pandemic. Also, remember that when you follow past events, you shouldn’t consider them as future trend indications. 

 

Fundamental Conditions, of February 2002

Fresh out of the recession, the American economy was slowly starting to improve, although certain analysts were speculating it might be on the verge of another recession. OPEC was in the middle of closing an agreement to cap the Oil output, and Russia apparently agreed to comply with the measures. 

Although Putin initially said he’d cooperate with the Global Oil Organisation, he had also announced he’ll carry his own plans. And that he did, failing to respect his side of the bargain, that was supposed to see him reduce both production and exports.

Nonetheless, despite Russia’s plans to go rogue and continue production and export volumes, Oil prices managed to follow a spectacular uptrend. It was all supported by growing concerns over the fate of the economy and substantial drops in worldwide production, with no apparent decrease in demand being signaled. 

 

You might also enjoy reading: WTI Oil – Market Analysis

‘While just a few days ago Oil was testing a new level below $21, during the past three days it seemed to be contouring a steady-increase. But could we witness a trend reversal or was it all just a correction of the downtrend that started at the beginning of the year? Today’s events could provide some clarity, in light of the latest updates’. Keep on reading to find out more…

 

Could the trend have been anticipated?

The steady-increase was maintained for almost a month, during which Oil recovered well over $7. Shortly after, it entered a correction pattern for approximately $2 and then went back on track, adding up and reaching over $29 by mid-May.

Checking the chart we can see that on the 11th of February, 2002 Oil’s prices were for the last time at less than $20 ($19.96 to be more specific), shortly after the indicators pointed towards a reversal of the trend. 

Starting with the Bollinger Bands, MACD, RSI and shortly after Parabolics SAR they all hinted the trend might go in a negative direction. The correction hadn’t lasted more than a week, before returning back up. And once again, we can spot the steady-uptrend continue, nicely indicated using all the four Technical Analysis tools.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage

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