We saw a huge 2+% drop on oil yesterday. AUDJPY dipped 0.6% as well. It was fear at work. But somehow the market just bought them back up near midday.
I thought that the more Brent went up, the lesser the possibility of an emergency supply cut will be implemented because OPEC will not see the need for them to act.
Given the price action, Brent seems to have priced-in the full effect of the COVID-19 outbreak. The number of new infected cases start to trim down. The threat of COVID-19 seems to have decreased.
Now, we should reassess what are the events forthcoming that would affect movement.
Possible reasons pushing oil up:
– OPEC+ decides to prolong supply cut beyond end of March – during March 5 meeting
– OPEC+ decides for deeper cuts – during March 5 meeting
– COVID-19 is under control and travel bans are being lifted
– China goes back to normal operation
– Middle east tension escalates
Possible reasons pulling down oil:
– Libyan conflict resolution
– Oil’s price increase beyond 60 will keep OPEC+ from intervening
It seems that as of now, the price of oil is more bullish. 60 and beyond might turn it bearish as it will keep OPEC+ from intervening.
On the flip side, any drop on oil price seems like a chance to buy.