Oil prices have seen an incredible decline throughout the first three months of 2020, with Brent losing 59% since the January peak of $71.07.
This comes off the back of an incredible double whammy of catastrophic events with demand plummeting off the back of a global coronavirus shutdown, and supply ramped up amid an oil war between Russia and Saudi Arabia. There has been plenty of speculation over the potential for further downside, with $20.00 often touted as a potential bottom for prices. While that could mean a long-term buying opportunity, it also points towards further downside for the short term.
The latest signal of waning demand has come from the airlines, with Emirates suspending all passenger flights as of 25 March. This is unlikely to be an outlier, with the skies and roads soon expected to fall silent as the world attempts to control the flow on this virus.
Nigeria highlights dash to sell at a loss
From a supply perspective, those with a long-term outlook will be keeping an eye out for any softening in the tone between Saudi Arabia and Russia.
However, Nigeria has now added another front to the battle to sell crude, with the African supplier dropping prices in a bid to garner any demand that remains. This highlights the problem that is currently evident within the oil-producing world, where any product that has been taken out of the ground must either remain in storage to await higher prices, or can be sold at rock-bottom prices (likely at a loss). Given that the costs of extraction may have already been undertaken, Nigeria is unlikely to be the only nation that is willing to take what it can get right now.
Bears likely to return despite long-term outlook
The long-term outlook must be a bullish one, with oil prices likely to be double where we are today once demand and supply becomes normalised in the wake of the crisis. However, for short-term traders, there is likely to be further downside to come.
The hourly chart for Brent crude highlights the recent rally into trendline resistance, with a strong chance of the bears coming back into play. A break up through the $32.21 level would bring about a more bullish outlook, yet the default view is that we see further downside to continue this bearish trend. With the price breaking below the $29.43 level, an extension below that point will provide greater confidence of another bearish move coming into play.