CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure. CFDs are a leveraged product and can result in losses that exceed deposits. Please ensure you fully understand how CFDs work and what their risks are, and take care to manage your exposure.

Oil prices rebound slightly, but likely to trend lower amid headwinds

Oil prices rebounded slightly on Friday, but the bounce was short-lived, with crude expected to trend lower amid a myriad of macroeconomic headwinds.

Oil prices rebounded a touch on Friday, with the commodity coming close to breaking above $40 a barrel, but the bounce was short-lived and the market is expected to trend lower amid a myriad of macroeconomic headwinds.

Brent crude managed to tick above $39 a barrel on Friday, but the benchmark eventually sunk lower to trade at $38.82, up 27 cents, at the time of publication. Meanwhile, the US West Texas Intermediate (WTI) slipped 0.5% to $36.16 a barrel.

Barclays ups oil price forecast

Despite disappointing global economic forecasts, weak demand and concerns about oversupply, analysts at Barclays raised their 2020 oil price forecast for Brent crude by $4 to $41 a barrel and believe that WTI will trade at an average of $37 this year.

However, analysts at the UK-based bank admitted that prices could fall over the near-term, with the stability of the market highly dependent on consumer behaviours.

Barclays also admitted that renewed fears over a second-wave of coronavirus cases emerging as the world begins to emerge from government-imposed lockdowns will keep prices subdued in the coming months.

‘As we mark to market our [second quarter] estimates and account for a potentially larger [second half] deficit, we raise our 2020 oil price forecasts by $4/b but remain cautious with respect to the curve over the near term,’ Amarpreet Singh, vice president of oil strategy at Barclays, said in a research note on Thursday.

WTI steadies after losses

Having stalled mid-week below $39.50, the WTI price dropped sharply yesterday, according to Chris Beauchamp, chief market analyst at IG.

‘Declines have been stemmed for now above the 100-day SMA ($34.92), but a further drop targets $31.00 and then $28.33 the rising 50-day SMA,’ he said.

‘Today’s price action will be vital, with a bounce towards $38.00 that creates a lower intraday high likely to create more selling pressure,’ Beauchamp added.

OECD warns of 'tightrope walk to recovery'

Earlier this week, the Organisation for Economic Co-operation and Development (OECD) said that the global economy faces a ‘tightrope walk to recovery’.

With little prospect of a vaccine becoming widely available this year, and faced with unprecedented uncertainty, the OECD presented two equally likely scenarios – one in which the virus is brought under control, and one in which a second global outbreak hits before the end of 2020.

‘If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6% this year, before climbing back 2.8% in 2021,’ the OECD said.

‘At its peak, unemployment in the OECD economies would be more than double the rate prior to the outbreaks, with little recovery in jobs next year.’

‘If a second wave of infections is avoided, global economic activity is expected to fall by 6% in 2020 and OECD unemployment to climb to 9.2% from 5.4% in 2019,’ the OECD added.

How to trade commodities with IG

Looking to trade the Brent crude and other commodities? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account
  2. Enter ‘Oil – Brent Crude’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

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