Crude Oil Made A Significant Comeback

Last week, crude oil struggled to break from its consolidation phase and, finally, was able to reach September’s high near $58 per barrel. However, oil had a bad start earlier this week, recording more than 4% loss in two trading days following trade pessimism and the inventory buildup reported by the American Petroleum Institute (API).   

The black commodity managed to recover those losses on Wednesday, with the help of an inventory report from the Energy Information Administration (EIA). According to the EIA, US crude inventories were expected to rise by 1.5M barrels, however an unexpected buildup of only 1.3M barrels led oil bulls into a buying spree.  

Despite the lack of clarity in trade sentiment, price action denied a bearish momentum, allowing oil prices to rebound from its upward trendline. 

Investors are now waiting for further confirmation in trade talks and decisions on tariffs. The main reason is the effects of trade tariffs on the crude oil market, and the impact on manufacturing sectors who are the primary consumer for the commodity. With higher tariffs harming manufacturers, production in global oil demand is being cut substantially. 

Aside from that, up ahead will be OPEC+ meeting in Vienna next month, where members are expected to discuss their production decrease plans. The current production cut stood at 1.2M barrels per day until March 2020, and the members will decide on whether to settle, reduce, or increase their production output in efforts to stabilize global oil prices. Although this old strategy implemented by the energy cartel has lately shown less than sufficient when aiming to prop up prices mainly because market sentiment is profoundly affected by escalating tension between Washington and Beijing.

Photo Credit: www.express.co.uk/