U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher early Monday, underpinned by news that the United States and China had put a looming trade war between the world’s two biggest economies “on hold”.
U.S. Treasury Secretary Steven Mnuchin said on Sunday that the U.S. trade war with China is “on hold” after the world’s largest economies agreed to drop their tariff threats while they work on a wider trade agreement.
In other news, the U.S. oil rig count, an early indicator of future output, was at 844, according to energy services firm Baker Hughes. That was the same count as the week before, which marked the highest level since March 2015.
The initial reaction to the U.S.-China trade news is positive since a full-blown trade war would have dealt a significant blow to global growth. However, there are some who say that without a further escalation in geopolitical risk, oil might be due for a short-term pullback.
There are also some who believe there is enough supply to meet demand despite ongoing production cuts by the OPEC-led coalition, plunging output in Venezuela and looming sanctions against major exporter Iran.
The current price action and the fundamentals suggest that Brent crude is likely to form a short-term top around $80 a barrel and pull-back to at least $76.44 to $75.48.
Last week, WTI crude oil hit $72.37 before pulling back slightly. A trade though $70.24 will change the trend to down on the daily chart with $69.57 to $68.91 the primary downside target.
This article was originally posted on FX Empire
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