Preliminary results of the April 2 parliamentary elections in Bulgaria have shown that former Prime Minister Boyko Borisov’s centerright GERB party has a slight lead over the pro-European We Continue The Change-Democratic Bulgaria coalition. However, no party is expected to gain a majority in parliament, adding uncertainty to the political gridlock that has plagued the country for years.
Political crisis deepens in Bulgaria
Since public anger over years of corruption boiled over into massive protests in 2020, Bulgaria has been governed by caretaker governments appointed by President Rumen Radev. The snap elections are the country’s fifth parliamentary vote in the last two years and were expected to break the political deadlock. However, with no party able to secure a clear majority, experts suggest that a coalition government may need to be formed.
Bomb threats and other challenges disrupt election process
The leadup to the election was marred by a spate of bomb threats that forced the closure of hundreds of schools set to function as polling stations. In addition, there were reports of violence and intimidation against voters in some areas. These incidents have raised questions about the legitimacy of the election and its aftermath.
Economic challenges hinder Bulgaria’s recovery
Bulgaria is also struggling with rampant inflation, which is hampering economic recovery from the COVID-19 pandemic. This economic crisis has prompted Bulgaria to postpone adopting the euro by one year to 2025. In February, the pro-Western government of Bulgarian Prime Minister Kiril Petkov fell after a no-confidence vote in parliament only six months after it took power.
OPEC Plus’ surprising decision to extend oil output cuts
In other news, OPEC Plus surprised the market with their decision to extend oil output cuts beyond their preemptive and proactive stance. Despite the banking crisis fears abating, OPEC Plus’ move is still surprising. The Chinese oil demand rebound has not fully materialized either, partly explaining OPEC Plus’ latest move.
Uncertainty remains in the oil market
Although oil prices have recovered and investors are returning to risk-off mode, there is still uncertainty in the oil market. OPEC Plus is likely trying to put a floor under prices and anticipate potential future financial market shocks and their impact on demand. Market nervousness and risk aversion make a sustained spike in prices unlikely.
Russian oil situation comfortable but Iraq faces dispute with Turkey
Russia had indicated a cut of 500,000 bpd but only cut 300,000 bpd, resulting in surplus in the market despite growing demand from China. Oil loss of 400,000 bpd from Iraq due to dispute between Turkey and Iraq in Kurdistan region further raises concerns about supply. On the up side, US crude oil stockpiles have fallen to a two-year low giving bulls some ammunition.
Bottom line for traders
While the momentum oscillator has recovered sharply, the trend remains bearish with pullbacks expected after strong up moves. A price resistance at the 50-day moving average suggests that leveraged long positions should be avoided while short positions can be accumulated with an expected downside target of 6000 and a stop loss of 6400 closing basis.
In conclusion, both Bulgaria’s political gridlock and the uncertain state of the oil market continue to pose challenges for their respective stakeholders. As political parties work towards forming a coalition government in Bulgaria, it remains to be seen how they will address inflation and other economic issues. Meanwhile, traders must remain aware of the developing situation surrounding OPEC Plus’ unexpected decision to extend oil output cuts as they navigate an already complex market.
Image Source: Wikimedia Commons
