Products
Platforms
Accounts
Inspiration
About
Support
For institutions
Log in Open account
International
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. 
Show more
CFDs and forex (FX) are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs, FX, or any of our other products work and whether you can afford to take the high risk of losing your money.
Show less
background image

Oil hit by recession fears but downside is limited

Commodities 5 minutes to read
Picture of Ole Hansen
Ole Hansen

Head of Commodity Strategy

Summary:  Crude oil’s roller-coaster ride continues to create a very challenging environment with the focus alternating between tight supply and the global economic slowdown's impact on future demand growth.

The difficulty in navigating a market with several and major opposing forces was laid bare last week when following a period of rangebound trading Brent crude oil suddenly collapsed. The slump towards key support at $60/barrel was triggered by President Trump’s decision to open another front in the already escalating trade war with China. However, his decision to use the tariff weapon against Mexico in order to force a reduction in the flow of migrants from Central America was rounded upon by business as potentially accelerating an already visible economic slowdown.

The recession themed sell-off has in our opinion potentially already  run its course after Brent crude found support ahead of key support at $60/b. A break below would signal a potential return to the December low which current fundamentals just simply don’t support. The short-term outlook nevertheless hinges on the performance of US stocks and whether speculative longs need to reduce bullish bets further. 
oil price
Source: Saxo Bank
A month that began with elevated speculative longs looking for the market to be supported by tight supply and Middle East tensions, turned on its head with WTI futures in New York posting its worst monthly performance in seven years. According to the latest Commitments of Traders report covering the week to May 28, speculators cut the combined net-long in WTI and Brent crude to a three-months low. 

For the first time during this recent reduction Brent crude was not immune with the tight supply focus switching to increased risk of lower growth and demand. The 41k lots Brent reduction to 353k was the biggest since last November while the 53% jump in the gross short to 50k lots was the biggest since October.
managed positions
Opec, led by Saudi Arabia, is now likely to increase its resolve to maintain pricesupportive production cuts beyond the current six-month period. The cartel meets later this month and with Saudi Arabia and others picking up market share from Iran, a contentious meeting lies in store. Helping this process has been news that Russia  produced less than its target for the first time since the current deal to cut supply was struck. However, the daily production of 11.114 million barrels/day, which is 76,000 barrels/day below the cap, was in response to the Druzhba pipeline contamination which reduced exports to Europe during the month. 

The monthly Opec oil production survey from Bloomberg published today found that the overall production level held steady in May with reductions from Kuwait (-40 kbp) and not least sanctions-hit Iran (-230 kbp) being offset by increases from Saudi Arabia (+170 kbp), Libya (+60 kbp) and Iraq (+50 kbp). 
producer outputs

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
    Read full article
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

    Read full article
  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

    Read full article
  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article

Content disclaimer

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Bank A/S and its entities within the Saxo Bank Group provide execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer and notification on non-independent investment research for more details.

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

Contact Saxo

Select region

International
International
Products & pricing
Platforms
Accounts & service
General
Other
Legal

All trading and investing comes with risk, including but not limited to the potential to lose your entire invested amount.

Information on our international website (as selected from the globe drop-down) can be accessed worldwide and relates to Saxo Bank A/S as the parent company of the Saxo Bank Group. Any mention of the Saxo Bank Group refers to the overall organisation, including subsidiaries and branches under Saxo Bank A/S. Client agreements are made with the relevant Saxo entity based on your country of residence and are governed by the applicable laws of that entity's jurisdiction.

Apple and the Apple logo are trademarks of Apple Inc., registered in the US and other countries. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.