The price of crude oil increased by almost 13 percent from October 3 to November 5, which puts oil at the forefront of assets with one of the highest returns in the last month. We paid attention to crude oil in October as it is one of the most interesting markets, or at least the one with slightly bigger volatility. At that time, even record-breaking stock indices did not obtain such a rate of return.
Over the past three sessions, the price of the WTI oil futures contract has increased by over 5.5 percent among others due to the persistent good market sentiment surrounding the US-China trade agreement. The closer to signing even an initial deal, the smaller the chances of a deeper slowdown in the global economy and, as a result, the smaller the fear of falling demand. In turn, higher demand is a chance for higher oil prices.
It is also worth noting that the balance of power on the oil market is changing. The cuts of OPEC and cartel allies who seek to prevent price drops are used by the United States, which increases its market share. What's more, OPEC has lowered its estimate of the amount of oil it will have to produce in the coming years, and US shale is flooding the market. The United States has recorded its first oil surplus in over four decades due to soaring production - Bloomberg reports. Thus, the US is not only economic and military power, but it is also beginning to dominate the oil market.
Meanwhile, the price of oil drops slightly from a six-week high. US oil reserves according to API (American Petroleum Institute) data increased by 4.26 million barrels last week. In addition, there are mixed signals about the trade agreement.
According to recent information, Beijing has asked the Trump administration to pledge not only to withdraw the risks associated with the new tariffs but also to drop tariffs on goods worth around $ 110 billion imposed in September. It is said that the negotiators are also discussing a reduction of a 25 percent duty on goods worth about $ 250 billion that Trump introduced last year.
Therefore, if optimism in the markets persists, it seems that there still may be some chances for a further potential rise in oil prices, as we wrote in previous comments, even to around USD 65. In turn, 51 USD remains the key support for the market.
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.
65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.