Crude oil bounced sharply overnight and continued to rally this morning. The catalyst for the move was an order from President Trump for a complete blockade of all sanctioned oil tankers entering and leaving Venezuela. This takes recent hostile action by the US against Venezuela up a step and increases geopolitical uncertainty.
This is particularly the case as Venezuela’s largest buyer of its oil is China. Recent reports suggest that while Chinese oil imports have been strong, the country has been stockpiling resources rather than using them in manufacturing or anything else. Yesterday, front-month WTI fell below $55 per barrel, hitting its lowest level since April.
So far, today’s bounce has taken prices back up to yesterday's open, so not a particularly significant move in the scheme of things. Back in April, front-month WTI surged around 12% off its sub-$55 low that day to close over $61 per barrel. That move was exaggerated by short-sellers who were forced to cover as prices rose.
Source: TN Trader
However, that move was preceded by a 24% slump in the oil price in just one week. This time round, the decline in oil has been relatively slow and steady. Even so, will history repeat? We’ll know by the end of today.
