Crude oil prices are extending this week’s recovery after a major sell-off on Friday, with Brent is approaching the $70 threshold for the first time since the start of the month. The barrel is up 1.18% on the day, and the key question now is whether the prices will have enough impetus to challenge the key psychological resistance in the short term.
The major driver behind the current bullish dynamics is the abated fear of a US-China trade war which runs the risk of undermining the global economic growth and, therefore, global oil demand. Due to investors’ relief on this front, Brent has managed to shake off the bearish pressure for the time being. Nevertheless, the current picture doesn’t look sustainable as risky assets may come under pressure again, should any fresh signs of trade escalation emerge.
In addition to this, there is a risk from the US data. Today’s API numbers may point to further inventory increase, and if the growth turns out substantial, the report may serve as a catalyst for profit taking at high and attractive levels. In this scenario, the asset will retreat from current highs below the $69 figure, though the bearish potential will likely be limited due to a favorable risk environment globally.
By Helen Rush
Senior Analyst at Capital Markets