Brent crude gained 1.35% on Tuesday and registered fresh late-September highs above the $63 handle. Oil prices saw three days of gains in a row amid a widespread optimism over a possible US-China trade deal. However, as the positive momentum in risky assets wanes due to a lack of fresh signals from the trade front, Brent struggles to extend the rally as well.
Also, traders were disappointed by a bearish API report which pointed to a rise in crude oil inventories by over 4 million barrels. Now, market participants, fearing negative data from EIA due later today, are shifting to a partial profit taking. However, the downside impetus is fairly limited so far, and the $62.50 area serves as a local support zone.
In the short term, oil prices dynamics will depend on the general risk sentiment in the global financial markets which seems to be turning sour amid a lack of further progress towards a partial trade deal. As such, there is a risk of losing ground in the oil market – Brent could get back below the 100-DMA around $61.50 should the prices fail to make a clear break above the $63 handle.
In the weekly charts, oil looks neutral as long as Brent is stuck between the 100- and 200-SMAs. To improve the technical picture, the futures need to confirm a sustained trading above the $60 psychological handle.