Brent crude remains relatively resilient amid a massive sell-off in the global financial markets. Trump escalated his trade war with China last week, with Beijing wowed to retaliate. Moreover, the yuan plunged below 7 per dollar for the first time since 2008, which may be a sign that China doesn’t expect a conclusion of a trade deal any time soon.
As such, there is a possibility of further escalation in trade tensions between the two world’s largest economies. Considering rising downside risks from this front, Brent could resume decline in the short term, with prices may challenge the $60 handle which served as a psychological support last week.
At this stage, a weaker dollar, bullish Baker Hughes data and geopolitical tensions are capping the selling pressure in the oil market. It is reported that Iran seized another foreign tanker in the Gulf. Meanwhile, Baker Hughes reported that US energy firms this week reduced the number of oil rigs operating for a fifth week in a row, to the lowest since February 2018.
Technically, Brent will hardly be able to hold above $61 in the near term, with the immediate support comes at $60.60, while the key barrier for bears lies around $60. A break below this level will make the technical picture even worse.