Brent crude broke through the psychologically significant $50 a barrel this morning at the first time of asking, providing further evidence that traders are not interested in picking bottoms in the oil price collapse just yet, despite it being down more than 56% in a little over six months. This is the first time Brent has traded below $50 since May 2009 and the fact that traders barely even hesitated at this level makes $40 a barrel for Brent crude look extremely likely. With momentum only appearing to gather, I don’t even think it will stop there unless we see a change in stance from OPEC (more specifically the Saudi’s given their clear pull in the group) or US shale companies starting to fall, which is clearly what OPEC is banking on.
Brent is now wavering around the $50 level but this simply looks like a dead cat bounce more so than anything else, making further losses in the short term look very likely, just as we saw in WTI a couple of days ago. With traders playing such little attention to technical levels until now, it’s difficult to highlight key levels but there are many levels between current prices and 47.26 – April 2009 lows – that have been strong support and resistance levels previously so we may see sellers take their foot off the gas a little in this region. Should this break though, particularly today, then $40 and even $36.20 – December 2008 lows – look a strong possibility.