Crude oil has posted gains of over 1 percent on Friday, and is pressing on the symbolic $60 level. Currently, crude is trading at $59.85, up $0.66 or 1.11%. Brent crude oil futures are trading at $65.10, up $0.80 or 1.21%.
U.S and China Agree on ‘Phase 1’
After almost three long years of a trade war between the United States and China, there was a major breakthrough on Thursday. The two sides are reported to have agreed to a ‘Phase 1’ interim trade agreement in principle, which means that U.S. President Trump must give his approval to the deal. The U.S. is scheduled to impose a new 15% tariff on some $160 billion on Chinese goods on December 15, and it remains unclear if this tariff will be suspended now that agreement is almost in place. Still, the news of a deal is significant, and I expect crude prices to move higher and break above the $60 level, which was last breached in mid-September.
EIA Surplus Points to Global Glut
Oil prices showed some movement on Wednesday, after the Energy Information Administration (EIA) surprised the markets with a surplus. The gain was only 0.8 million barrels, but analysts had predicted a significant decline of 2.9 million. There is a large oversupply of crude on global markets, and the EIA report has shown surpluses in ten of the past twelve releases. OPEC has responded with a cut in production, effective January 1, but it remains to be seen if OPEC members will adhere to the deal and reduce their production levels. If not, oil prices could reverse directions and head lower.
WTI/USD has been putting pressure on the 59.25 line all week and has put some distance above this line on Friday. The pair is putting pressure on the 60.00 level, which has psychological significance. This line has not seen action since mid-September, so a break above this line could give crude strong upward momentum.
On the downside, 58.50 has some breathing room in support as the pair has moved higher. Below, there is support at 57.50. This is followed by the 200-EMA at 57.10 and the 50-EMA at 56.82. With crude facing significant support barriers, the trend remains upward.
This article was originally posted on FX Empire
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