Crude Oil Sharp Retracement Back To Upward Trend-line

Oil prices had been traded in an upward trend channel since the month of October, hitting a two-month high in November, above its $58 level. However, the black commodity retraced sharply from its top-levels on November’s last Friday trading day, falling up to 5% while recording its most considerable intraday losses since September.

The oil market’s sentiment turned sour following negative comments from Russian Energy Minister, Alexander Novak. Novak stated that he would prefer if OPEC and its allies, banded under a group called OPEC+, would only decide whether or not to extend the production cut close to April next year. The current plan abided by OPEC+ is to cut production by 1.2M barrels per day until the end of March 2020. 

However, Novak’s comment would likely be rejected during the cartels’ meeting in Vienna on December 5 & 6. The members are highly expected to discuss their future planning in preventing oil prices from falling lower amid weak demand growth. 

Besides that, recent trade tensions further supported the sell-off on the commodity after US President Donald Trump signed a bill to support Hong Kong protesters. The signage, seen by China as tampering in their internal affairs, would potentially jeopardize trade relations between the two economic powerhouses, further preventing both sides from reaching a phase one trade deal. 

Market concerns now are placed on the new rounds of American tariffs on Chinese goods taking effect on December 15. In a nutshell, additional tariffs would harm manufacturing sectors, reducing their production and the demand for crude oil. If the taxes go into effect, the now 17-month long trade war will face further uncertainties while further harming the global economy. 

Oil prices managed to rebound from its upward trend-line during the early Monday trading session, supported by upbeat Caixin Manufacturing data from China. Besides that, despite concerns from Novak, the market is still placing their hopes on positive news from OPEC+ meeting later this week.