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Crude Oil Prices Fall Below The $20.00 level Even After OPEC+ Agrees To Make Cuts

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Crude oil prices are on a rollercoaster after they plunged 10% on Wednesday even on the wake of oil producer announcing an agreement to cut production. The announcement to slash production last week has not helped oil prices but has even heightened selling pressure.

Low crude oil prices hurting US shale oil production

For now, it seems like OPEC+ has played its part and there are no more cuts expected from Russia or Saudi Arabia. It is important to note that Russia was initially not ready to cut production and the move by Saudi Arabia to flood the market exacerbated the situation. OPEC+ has agreed to cut production by almost 10 million barrels/day.

For the US Shale industry cuts are expected because if the prices don’t go above $30 soon the industry will find it difficult to survive considering their breakeven price per barrel is $50.00. OPEC+ has been pushing for cuts in US shale oil production but that has not been possible because cuts are based on energy companies’ CAPEX.

Crude Oil analysis

Crude oil prices have dropped below the $20.00 per barrel hitting a new 18-year low having dropped by 30% from its monthly high. Currently, US crude oil is trading around $19.45 spelling disaster for the US shale oil sector.

After dropping almost 70% from January highs crude oil is currently fluctuating around $20 levels. Oil could likely face more drops as demand concerns grow with the risk of a global economic downturn also becoming apparent. Such scenarios could deepen the woes of an already hammered market thus dealing with a significant impact on investor sentiment.

In the past week, oil prices have been on a downward path slipping below $20.00. Already this is putting March lows in bearish focus which will be surprising considering the supply cuts were expected to boost sentiment. Oil seems to be on a downward trend and has established support at $19.74 and formed resistance at $20.15.

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