Entering text into the input field will update the search result below

Oil Prices Likely To Remain Range Bound

Mar. 04, 2020 10:41 AM ETUSO, OIL-OLD, UCO, SCO, BNO, DBO, DTO, USL, SZOXF, OIL, OILK, OILX6 Comments
Osama Rizvi profile picture
Osama Rizvi


  • Markets are overreacting to the current outbreak of coronavirus. Fundamentals suggest that China's oil consumption still remains robust and can recover quickly.
  • Fed says that it will act appropriately and Saudi Arabia is planning to cut 1 million barrels per day. The virus itself seems to be under control in China.
  • There are other indicators as well that show economic activity is recovering. We might see oil prices start to rise again.
  • The psychological barrier of $40 seems a strong one and a nice area to go long on WTI for an upside of $3-$4.

Oil prices, in less than 2 months, have faced some serious volatility. First a geopolitical flash point was triggered in January 2020 and global crude prices touched $70 and $65 -- Brent and WTI respectively. After that a deadly pathogen known as Novel coronavirus (initially nCov-19 and recently COVID-19) shook the whole world with global financial and commodity markets cratering to an extremely bearish territory. The U.S. stocks have already entered into a correction (a 10 percent drop from recent highs) and oil markets are panicking with WTI now trading at $45.25 (at the time of writing).

Against this bearish background, a valid and highly significant question is how low can the prices go? As simple as it sounds; one cannot answer it exactly however, we can try to track the trajectory in the coming days based on a few fundamentals and lots of sentiment.

The meaning of the phrase ‘If China sneezes, the world catch a cold’ couldn’t be clearer lately. China contributes more than 17 percent to the global GDP. It is the most important node in the nexus of global value chains. It makes 70 percent of the world's air conditioners, 58 percent of shoes and Chinese overseas have spent about $277 bn in 2018 - one fifth of global spending. China also accounts for 13 percent of global crude oil demand.

With this in mind, it is natural that a virus with its epicenter in China (Wuhan, Hubei province) can inject real fears of a recession -- shadowing the fundamentals. Let’s talk about China’s oil demand. Whereas slow growth in oil isn’t a new phenomenon, this year the IEA has slashed its growth forecast for first quarter of 2020 by 435,000 bpd. The total anticipated demand has been slashed by 365,000 bpd to 835, 000 bpd for

This article was written by

Osama Rizvi profile picture
Osama Rizvi is an Energy and Economic Analyst. I connect geopolitics, international security and try to present a bigger picture analysis. He has written for all the major English newspapers of Pakistan such as Dawn, Dailytimes, Express Tribune, Nation, Business Recorder. He also appears on AAJ Tv and PTV World as an economic analyst and provide commentary on global commodities and markets as well. Osama has also appeared on CGTN's flagship program, Beijing Hour with Liu Xin with his work featured in CGTN newspaper as well. He is a regular panelist at Gulf Intelligence Podcast, Asharq with Bloomberg, and TRT World. He has aso been featured at CNBC Arabia.He contributes internationally in one of the most famous outlets for energy news website such as Oilprice and is work has been featured in Business Insider, Shale Mag and others. He was recently published in The Diplomat Magazine as well. Apart from he is regularly featured as an analyst at Capital.com too.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (6)

yannis72 profile picture
i am looking forward for your next article !
Osama Rizvi profile picture
@yannis72 I wrote few blog posts after this, did you get a chance to have a look?
yannis72 profile picture
Oh , i hadn't seen them , thanks !
yannis72 profile picture
What are the chances for BP to cut its dividend by the end of the year?
Any thoughts?
Osama Rizvi profile picture
@yannis72 I believe the chances for that are quite high.

I am going to write another article on oil prices as the sudden price war has totally shifted the whole situation and introduced more variables.
yannis72 profile picture
I 'd say this mess is going to last two quarters . Hopefully i have passed through the same situation in 2016 and i know how to react now.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.