Crude Oil Daily Forecast – Crude Falls Below $23 on Recession FearsCrude oil continues to plunge, as prices have fallen 16 percent on Wednesday. The COVID-19 outbreak has raised fears of a recession in the U.S., which could push crude below the $20 level.
Crude Crumbles, is $20 Next?
Crude remains in free-fall, as prices have declined 31.1% this week alone. In the month of March, crude has fallen a staggering 49.8%. It has become ‘March Madness’ for oil prices, with analysts saying there is even more room for prices to drop. Louise Dickson, an analyst at Rystad Energy, wrote in a note that “with each day, there seems to be yet another trapdoor lying beneath oil prices. What we are seeing here is essentially the atomic bomb equivalent in the oil markets.”
Trump Announces Stimulus Package
The Trump Administration has unveiled plans to boost the economy with a massive stimulus package, which is estimated at some $1 trillion. The package is expected to include direct payments, deferred payments and tax breaks. The plan will require Congressional approval, and Treasury Secretary Mnuchin warned that if the package is not approved, unemployment could skyrocket as high as 20 percent.
There are growing fears that the U.S. could be headed to a recession, as the economy has been hit hard by the COVID-19 outbreak. The slowdown in the world’s largest economy is weighing heavily on demand for crude, which has sustained steep declines due to the collapse of global travel and the economic paralysis in China.
The meltdown in oil prices is a combination of reduced demand and excess supply. This situation has been exacerbated by the price war between Saudi Arabia and Russia, following the latter’s refusal to go along with a deep cut to output that was proposed by OPEC. The slide in oil prices could well continue – in a client note on Tuesday, Goldman Sachs said that Brent oil could drop as low as $20 in the second quarter.
Cure continues to fall and break below support levels. There is pressure on support at 22.62. This is followed by support at 21.37, which is protecting the symbolic number of 20.00. On the upside, there is resistance at 24.20, followed by resistance at 26.80.