Is crude oil reversing lower amid Kazakhstan production concerns?
Crude oil closed 2.02% higher on Tuesday, retracing a part of Monday's 3.5% selloff as sentiment improved on calming comments from administration about tariff talks and potential Russia-Ukraine deal. Today, crude oil is down 0.7% despite a rally in stock prices as markets await ISM PMI releases at 9:45 a.m., Bessent speech at 10:00 a.m., and the oil inventories release at 10:30 a.m.
For oil markets specifically, these developments are worth monitoring:
- Kazakhstan's new Energy Minister told Reuters that his country will prioritize national interests over OPEC+ when deciding oil output levels. Kazakhstan has angered other OPEC+ members by producing more than its allotted quota.
- President Trump signaled the possibility of lower tariffs on Chinese imports, while the Chinese foreign ministry said the United States should stop making threats if it wants to make a deal.
- Markets remain highly sensitive to news, with oil trading largely following broader market sentiment.
Conclusion
Crude oil is giving back some of Tuesday's gains despite a strong rally in equity markets. The divergence between oil and stocks suggests specific oil market concerns are weighing on prices, particularly Kazakhstan's defiant stance on production quotas.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Tuesday's 2% gain has partially reversed today.
- The Trump-Powell conflict has created additional market uncertainty, with concerns about political interference in monetary policy adding to existing worries about tariffs.
- The medium-term outlook appears cautious, as the market remains below key technical levels.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist