Is crude oil set to continue its rebound following consolidation last week?
Crude oil gained 1.41% on Friday, continuing its consolidation above the $60 level. However, this morning, it’s trading 1.0% lower as Moody's downgrade of the U.S. credit rating has introduced fresh uncertainty to the markets.
For oil markets specifically, these developments are worth monitoring:
- Moody's downgraded the U.S. sovereign credit rating late last week to 'Aa1' from 'Aaa', citing concerns over the country's ballooning $36 trillion debt.
- U.S. President Donald Trump announced the U.S. is "very close" to securing a nuclear deal with Iran, which could potentially introduce significant additional supply to the market.
- Chinese economic data showed industrial output performed better than expected, but retail sales fell below expectations, signaling potential weakness in demand from the world's largest oil importer.
Conclusion
Crude oil extends its fluctuations following the early April sell-off. The market faces conflicting pressures - the potential additional supply from Iran and rising global production are weighing on prices, while the recent U.S.-China trade agreement provided some support last week.
The key support zone around $60 remains critical for short-term price action. Oil hasn't retraced as much as stock markets, likely due to greater supply concerns.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil contracts are declining today following Moody's U.S. credit downgrade.
- Markets are also watching scheduled talks between Presidents Trump and Putin regarding the Russia-Ukraine situation.
- Supply concerns continue to outweigh the positive sentiment from the U.S.-China tariff reduction agreement.
As always, we’ll keep you, our subscribers, well-informed.
Thank you.
Paul Rejczak,
Stock Trading Strategist
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