Fundamental analytics

Oil recovers on softening of concerns linked to the escalation of trade dispute between USA and China.


Crude oil market starts new trading week with quite a confident growth of the quotes on the back of certain ease of worries regarding further escalation of trade dispute between USA and China. Despite enabling new tariffs on Friday both sides are intended to continue trade negotiations, that have been lasting for more than 5 months already. Trump didn’t rule out cancelling of all previously applied restraints in case of reaching a progress in negotiations. On Sunday Chinese side has sent an official invitation to Secretary of the Treasury and US trade representative to visit Beijing for continuation of negotiations. Since both sides are showing desire to de-escalate the tension in trade relationship investors hope, that the conflict might be resolved shortly.

Moderate support to the quotes was provided by the data from Baker Hughes released on Friday. According to delivered information the oil rig count have decreased by 2 for the week to 805 units.

It’s worth to regard as support factor the messages on putting on hold the output in Norwegian offshore oil field Oseberg Field Center, which accounts for up to 6% of all crude produced in Norway.

Today in the afternoon the messages have passed as well regarding production cuts in Russia. According to the data of two industry-related sources in the first decade of May average daily output in Russian Federation has declined from 11,23 million barrels to 11,16 million barrels.

Investors are still focusing on the situation with tightening of American sanctions against Iran. Investors expect further actions from the EU countries, that oppose Iran’s withdrawal from the “nuclear deal”.

On the chart a break of local resistance at 70.75 took place today, that opens room for further recovery of the quotes towards 72.00. But it’s unlikely, that buyers will be capable to overcome resistance at 72.00 on the fly, therefore we expect decline from these levels and pullback of the price under 70.00.

Resistance levels: 72.00, 73.20, 74.00;

Support levels: 69.80, 68.85, 66.00.

Main scenario: Growth towards 72.00 and decline to 69.80 afterwards.

On the market a moderately optimistic sentiment preserves so far, but on the chart the quotes’ growth potential is limited by the 72.00 level so far. Therefore we can look for sell entry points at this mark.

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