Crude Oil Price Back to the $40 On Undersupplied Oil Market

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Written By: Mircea Vasiu
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    Summary:
  • Crude oil price bounced back to the $40 level in a bullish channel. The chances are that the bullish bias will continue as economies recover.

Crude oil price bounced from the lows after forming a triangle as a reversal pattern. The move that followed keeps a bullish bias as the market makes higher highs and higher lows. The rising channel points to further upside potential, especially considering that the market is likely undersupplied for the rest of 2020.

Easing of Lockdowns Led to Oil Market Recovery

Now that the summer is behind us and well into pandemic (six-months already), we already start seeing second waves in most developed countries. Spain, France, Germany, and the United States have registered spikes in the number of infections.


In some cases, especially in Europe, the number of infections exceeds the March 2020 peak. However, there are no full lockdowns planned, only partial ones so far. It means that the oil demand will continue to rise, and the oil market’s gradual recovery as well.


The massive fall in the U.S. shale oil output (approximately 2 million barrels/day) was not offset by an increase in production. In the last four months, oil demand bounced by almost 14 million barrels/day, leading to an undersupplied market into the last quarter of the year.

Crude Oil Price Technical Analysis

The $40 level acted as a pivotal one for the crude oil price. Producers are content with this level, considering the pandemic and what happened in April when the price of oil fell into negative territory.

As such, the chances are that the price of oil will continue to hover around it, but with a bullish perspective. To participate on the long side, bulls may want to trade a break above $40 and wait for a move above $41.50. It means that the crude oil price makes a new higher high – typical formation in a rising market.

We should not be surprised to see a move into $50, especially if the economic recovery continues. On the flip side, a move back below $35 invalidates the bullish scenario.

Crude Oil Price Forecast

Written By: Mircea Vasiu

Mircea, MBA in International Business graduating Magna Cum Laudae, trades for a living and contributes to various financial publications for more than six years. He writes about macroeconomics, stock indices, currencies, and most recently ETFs and individual stocks. For the past decade, he’s involved in everything trading related, mostly in the currency market, both with manual and algorithmic trading.

Published by
Written By: Mircea Vasiu