The rise in oil prices in global markets could lead to the third consecutive week of price increases. This is currently the best series of weekly gains since March 2019. As a result, the price of WTI oil has risen to its highest level since September 2019, exceeding USD 61 per barrel.
One of the main reasons for optimism on the oil market seems to be the upcoming signing of the phase one of the trade agreement between the United States and China, which may occur as early as January. Americans and Chinese are willing to make concessions to end the trade conflict, which in turn may translate into a recovery in the global economy and thus increase oil demand. In addition, oil prices seem to support the December decision of OPEC countries to further cut production. If oil prices maintain current rise, it may be the best December since 2002 for this market.
Therefore, two factors are still key for crude oil trading. The first is the policy of the OPEC and OPEC + countries, which seems unchanged at the moment and aims to reduce production, which is to reduce supply and increase the prices that OPEC governments need so much to balance their budgets. The United States, which thanks to shale production, is able to increase its market share, and at higher prices it is more profitable to invest more in other shale projects. Hence, the United States may soon begin to deal the cards permanently on the global oil market.
The second key factor for oil prices seems to be the progress in the trade war. The bigger and more significant these steps will be, leading to concessions, the price of oil may rise to higher levels. However, if at some point there were any glitches on the US-China line, then bears on the oil market may take control.
From the point of view of significant price levels for WTI oil, it is currently worth paying attention to the USD 64 area, where in the past there was a more significant level of support (June, August 2018) and resistance (April 2019). This level may be a barrier to possible further price increases.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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