Market News & Analysis
Oil Back To $53 As Sentiment Improves?
Fiona Cincotta February 6, 2020 10:45 PM
Oil is extending gains from the previous session on Thursday, adding 1% to Wednesday’s 2.5% lift. This is the first time in over two weeks that oil has advanced for two consecutive sessions.
Down 16% YTD
To say oil has had a bad start to the year would be an understatement. Despite the signing of the US -China first phase trade deal which was expected to boost future demand expectations, WTI has shed over 16% of its value year to date. However, these losses have come about over the past three weeks.
Coronavirus fears and its potential impact on Chinese economic growth has hit the price of oil hard. This is because slower growth in China, the second largest global consumer of oil would hit future demand significantly. Between January 20th – 4th February, the price of oil sunk over 17.5%, with just one day of gains across the period.
Coronavirus vaccine breakthrough & strong US data
Yesterday’s news of a coronavirus vaccine breakthrough was therefore well received by oil traders. Optimism that a cure to the lethal virus will be produced soon has helped abate fears over coronavirus and consequently future demand of oil.
Additionally, data from the US (the largest consumer of oil in the world) showing the US economy to be on a solid footing also supported the price of oil. ADP revealed a staggering 291,000 private jobs were created in January. ISM non-manufacturing index jumped to 55.5 last month the highest level since August.
Not even higher than expected crude oil inventories were able to cap oil’s gains. The EIA reported a surplus of 3.4 million barrels last week, ahead of the 2.9 million expected.
Levels to watch
Oil has moved above the its falling trend line on the 1 hour chart. After rebounding off yesterday’s low $49.25, oil has made series of higher highs and higher lows.
Immediate resistance can be seen around $52.16 (today’s high). A close above this level could see oil push towards ascending trend line resistance at $53.
On the downside, a move below support from the descending trend line around $50.20 could indicate the bears are in control and look to test $49.25.
From time to time, GAIN Capital Australia Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.
As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.