Oil Settles Above $40 After Trump Says That Trade Deal Is IntactOil managed to get above the psychologically important resistance level and tries to gain more upside momentum.
Oil Video 23.06.20.
Positive News About U.S. – China Trade Deal Provide A Boost To Oil Prices
Oil managed to settle above the key resistance level at $40 after U.S. President Donald Trump confirmed that the trade deal with China was intact.
Earlier, the markets were worried about the comments of White House trade adviser Peter Navarro who first stated that the trade deal was over but then backpedaled from his previous comment and said that the deal was still in place.
The confirmation of the trade deal is a major bullish factor for the oil market which would have been hit materially if the first phase of the U.S. – China trade deal disintegrated due to increased U.S. – China tensions.
That said, these tensions are not going away. While some observers may point out that coronavirus has contributed to the recent increase of tensions between the two biggest economies or that the upcoming U.S. elections will lead to a new round of tensions, the simple fact is that China has grown to become a big economic power with its own interests.
In this situation, periodic tensions between two big economies which battle for finite markets and resources are inevitable. Thus, oil traders should get comfortable with the regular news flow about U.S. – China tensions and pay attention only to significant developments on this front.
Will U.S. Crude Oil Inventories Decline?
The key question is whether inventories will finally start to fall. Analysts are cautious and expect that crude oil inventories will increase by 0.4 million barrels while projecting decreases for gasoline and distillate fuel inventories.
The U.S. domestic oil production continues to decline together with the number of drilling rigs, so the market may be anticipating a decrease in inventories. For this scenario to be realized in practice, imports should stay flat while demand should show signs of improvement.
Oil has just settled above the psychologically important $40 level so inventory report will be very important for near-term oil price dynamics. A good report will provide additional upside momentum while a disappointing report could easily push oil back below $40.
For a look at all of today’s economic events, check out our economic calendar.