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 slide below $40 after US stockpiles hit all-time high

Oil prices fell again on Thursday, with Brent crude slipping below the psychological $40 mark as US stockpiles hit an all-time high and the Federal Reserve warns that it could take years before the economy fully recovers.

Oil prices fell again on Thursday, with Brent crude slipping below the psychological $40 mark as US stockpiles hit an all-time high and the Federal Reserve warns that it could take years before the economy fully recovers.

Brent crude is down 5% at $39.25 a barrel on Thursday, with the US West Texas Intermediate (WTI) down 7% at $36.74 a barrel at the time of publication.

Brent crude falls into key support zone

Brent has declined back into the $39.95 - $40.28 support zone this morning, following sharp gains yesterday. The build in US inventories has not done Brent any favours, with continued builds in stockpiles highlighting the continued oversupply that exists, according to Josh Mahony, senior market analyst at IG.

‘Nevertheless, from a technical perspective, we are at a key crossroad for Brent,’ Mahony said. ‘A break below trendline and horizontal support would point towards a potential capitulation for crude as we unravel some of the gains seen over recent months.’

‘However, the uptrend does remain in play, and another leg higher is still a possibility if the price remains above this key support zone,’ he added.

US Federal Reserve warns of ‘long road’ to recovery

Oil prices and US stocks were also dragged lower by Federal Reserve Chairman Jerome Powell’s dim economic outlook, with the head of America’s central bank conceding that the US economy faces a ‘long road’ to recovery.

The Fed has pledged to continue to support the US economy and said that it will leave interest rates near zero for the foreseeable future.

The S&P 500 and Dow Jones Industrial Average indexes both opened lower on Thursday, down more than 2%, with the pairs earlier gains completely eroded by the Fed’s grim outlook.

On Wednesday, 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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