Crude oil bounced back today, gaining 1.6% after yesterday's decline -- will the market stabilize within its current range?
Crude oil lost 1.02% on Wednesday, retracing part of Tuesday's over 3% rebound. However, today the market is showing strength again, up 1.6% following the announcement of a UK-US trade deal and in the aftermath of the Federal Reserve's decision to keep interest rates steady.
For oil markets specifically, these developments are worth monitoring:
- Federal Reserve kept interest rates steady but warned about increased risks of inflation and unemployment, creating mixed signals for economic growth.
- President Trump has announced a trade deal with the United Kingdom, signaling a positive shift in global trade relations.
- Yesterday's oil inventories data showed a drawdown of 2.0 million barrels, higher than expected, indicating relatively strong demand.
- U.S. officials are set to meet Chinese counterparts over the weekend for trade talks, suggesting a potential easing of trade tensions.
Oil: Consolidating Between Support and Resistance
Crude oil appears to be moving within a consolidation between key support at $55 (near the early April lows) and short-term resistance at $60.
The market's reaction to both technical levels and fundamental news suggests we're in a period of volatility after recent sell-off.
Inventories: Supportive Data
Yesterday's inventory report showed a drawdown of 2.0 million barrels, exceeding expectations. Unlike previous sessions where positive inventory data was largely ignored, today's price action suggests the market is finally acknowledging this supportive fundamental factor, especially when combined with news of lower OPEC output in April.
Conclusion
Crude oil is showing signs of stabilization after a period of heightened volatility, with key support at $55 holding firm and prices rebounding on positive trade developments and supportive inventory data.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil may continue consolidating between key support of $55 and short-term $60 resistance; today, it’s gaining 1.6%.
- The UK-US trade deal announcement and upcoming US-China talks provide cautious optimism for global trade.
- The Fed's mixed signals on inflation and economic growth create uncertainty that may limit sustained directional moves.
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Paul Rejczak,
Stock Trading Strategist