Is crude oil breaking out of its consolidation pattern on renewed trade optimism?
Crude oil lost 0.33% on Tuesday, extending its short-term consolidation slightly below the $62 level. However, it's gaining approximately 1.6% this morning as markets react to speculation over potential US-China trade talks. After last week's volatility, the market appears to be finding some footing, though it remains well below the broken medium-term support level of $65-66.
For oil markets specifically, these developments are worth monitoring:
- Bloomberg reports that China may be open to trade talks with the US, but wants "more respect" before agreeing to negotiations.
- Oil inventories data is due at 10:30 a.m. today, which could introduce additional volatility.
- Fed Chair Powell is scheduled to speak at 1:30 p.m., potentially addressing tariff impacts on the economy.
- Markets remain highly sensitive to news, with oil trading largely following broader market sentiment.
Conclusion
Crude oil is showing signs of life today as trade talk speculation provides a temporary boost, though the technical picture remains uncertain. The market may be topping in the short-term, potentially extending its consolidation following recent declines.
The market remains highly sensitive to US-China trade developments, with recent tariff concerns weighing heavily on global growth expectations and oil demand forecasts. Today's oil inventories data and Powell's speech could provide additional directional cues.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil lost 0.33% on Tuesday but is gaining 1.6% in early Wednesday trading.
- The medium-term outlook appears cautious despite today's gains, as the market remains below key technical levels.
- Market volatility has decreased following last week's fluctuations, but catalysts today could change that quickly.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist