In viewing the daily chart for oil, several analogies come to mind, and perhaps the best and most descriptive is of an old tramp steamer, wallowing in heavy seas and increasingly taking on water in a desperate battle to stay afloat, but settling ever deeper in the water, with the only question being when, and not if it will sink. Throughout March our tramp steamer has been taking on water fast, initially breaking below the platform of support in the $53 per barrel region, before being engulfed by a further wave, taking the commodity through the $50 per barrel area before settling deeper in the water! Over the last few days, the ships pumps have managed to stem to flow with a minor rally higher, but which looks increasinly weak, and it is now only a question of time before another large wave engulfs this market, with a move below the platform of support now being built in the $44 per barrel area, opening the way to yet further downwards momentum. Whilst oil will not hit the sea bed as such, our tramp steamer looks destined to continue its desperate battle to stay afloat, and with OPEC refusing to act and with world markets awash with oil and weak economic data, the outlook remains heavily bearish.
By Anna Coulling