Crude oil price hits 11-week high on high U.S.-China tensions
- Crude oil price hits a 11-week high as it trades near $36 for the first time since March
- China instructed state-owned firms to suspend purchases of soybeans and pork from the United States
- OPEC countries and Russia are reportedly inching closer to a deal to extend oil output cuts
Crude oil price is trading above the $35 mark for the first time since the first half of March as rising U.S.-China tensions weighed on risk sentiment.
Fundamental analysis: An escalation in tensions between the United States and China
Crude oil prices are trading around 1% higher today to hit the levels near the $36 handle for the first time since March 11. Prices have been recovering for weeks after printing historic lows.
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Investors are watching closely the developments in the row between the United States and China, after the Asian superpower warned of retaliation on U.S. moves over Hong Kong.
“The possibility of heightened tensions does pose a risk for the recent rally in oil prices,” said Harry Tchilinguirian, head of commodity research at BNP Paribas.
Reuters reported that China instructed state-owned firms to suspend purchases of soybeans and pork from the United States. Moreover, it seems that the OPEC countries and Russia are inching closer to a deal to extend oil output cuts.
“Oil prices have strengthened to levels where shutting-in no longer makes sense and should actually encourage producers to quickly restore production,” according to a BofA Global Research report.
As a result, OPEC is likely to meet this week instead of the regular meeting that was previously scheduled for July. Last week, Russia’s oil ministry said that he expects demand and supply for the pandemic-stricken commodity to rebalance by July.
“For now, the surplus stands at around 7-12 million barrels per day. The energy ministry is counting on the market to balance out in June – July thanks to a consumption increase,” the Minister Alexander Novak said.
Invezz reported recently that the U.S. shale producers need oil to rebound back above $50 in order to survive.
Technical analysis: Prices hit the short-term resistance
Crude oil has been trading in a continuous uptrend since hitting the all-time lows in mid-April. The interest to trade oil at higher levels seems to have picked up again as price action has now finally caught up with the 100-DMA near the $36 mark. The last time crude oil price hit 100-DMA was in early January.
From here, we wouldn’t be surprised to see a pullback towards the horizontal support around $30, where we may see a decent interest to buy crude oil. If the buyers force a break above the 100-DMA, a likelihood of a move toward the key resistance at $42 increases.
Crude oil price is trading at the highest levels since March 11 as the recovery from the record lows set in April continues. Rising U.S. – China tensions have been weighing on the risk sentiment, while investors expect OPEC countries and Russia to reach a deal to extend oil output cuts.
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