Crude oil rallied sharply last Thursday, but not by enough to push prices into positive territory for the week, let alone the month of February. It went on to sell off sharply yesterday, following a report that OPEC+ would not be extending their production cuts beyond April.
The production cuts have been running since May 2023, and have been extended on several occasions. Most analysts believed that OPEC would roll over the cuts beyond April, given the supply dynamics that have kept prices subdued, along with a succession of downgrades to the demand growth outlook.
It is now estimated that supply will be boosted by an additional 138,000 barrels per day, mostly from Saudi Arabia and Russia.
With Trump’s tariffs on Mexico and Canada kicking in today and with China retaliating against additional tariffs with levies of its own on US imports, the world trade situation is getting increasingly and unnecessarily complex.
Front-month WTI continues to trade south of $70 per barrel and this will be its first hurdle on any rally attempt. The daily MACD is in negative territory, but it is not back to the kind of oversold levels from which big rallies have previously begun.
Overall, it feels as if the bears have control, having driven back prices from the highs made in mid-January. Back then, crude looked as if it had finally broken out of a downtrend which had been building from September 2023.
Source: TradingView
Crude was lower again this morning, shrugging off some relatively upbeat manufacturing data from China. Investors have yet to be convinced that the Chinese economy is ready to recover from its disastrous property collapse. This saw the evaporation of billions of yuan, with a significant proportion owned by private citizens, and the subsequent loss of confidence.
