Crude oil prices are approaching the $20.00 level again following a dip of almost 30% in the last three sessions. The drop in prices sent traders on panic mode this past week ahead of the OPEC+ conference. The prices slumped on Monday with the agreement by OPEC and oil-producing countries to slash production failed to address broader concerns of declining global demand.
Cutting oil production yet to ease concerns
On Thursday during the OPEC+ meeting crude oil jumped 7% early in the session pushing the price to $28.00/barrel. This was over 45% above March 30th drop but the gains later reversed abruptly. Although the producers agreed on massive production cuts crude oil notched a 30% slump on the highs of last Thursday.
The slump is an indication that the global demand for crude oil is somewhat ahead of the supply cuts agreed by OPEC nations. The oil producers had agreed to cut supply to shore up crude oil markets that have suffered due to the coronavirus pandemic that has curtailed global oil demand.
The oil prices have been on a downward trend on concerns about COVID-19 and the oil price war between Russia and Saudi Arabia. With the agreement currencies of oil-producing countries such as Canada and Mexico received a boost last week but the gains reversed on Monday as traders sought less risky assets.
Crude oil analysis
Although oil futures scrapped the early losses to move higher, the currency moves demonstrated investor fear about the current market uncertainties. Following these concerns, there is a possibility that crude oil could fall below $20 per barrel because of the imbalance between market demand and supply even with the deal to cut production.
Currently, there is a bearish trend on crude oil and the prices have formed support just above $20.71 and resistance at $21.51 per barrel. Interestingly lows of $17.00, like the ones experienced in 2001, could be in sight if bears make a push below the support level of $20.17.