CRUDE OIL PRICE
Crude oil price bounced back in overnight trading as optimism returned to the market. There were four big stories that provided this catalyst.
In an interview with Fox Business, Donald Trump called the current oil prices ridiculous. He also said that he would talk to Russia’s Vladimir Putin on how to rebalance the prices. This was seen as a positive sign at a time when Saudi and Russia are increasing their production. The biggest question is why the US is going slow on Saudi, which holds all the cards.
Second, as I reported earlier today, the World Health Organization (WHO) says that Coronavirus cases in Europe are starting to flatten. This is after the number of new infections and deaths declined in the hot spots of Italy and Spain. A decline in cases is a positive sign because it means we will start seeing more business activities.
Third, and most importantly, China Logistics released important manufacturing PMI data. The numbers showed that activity in the manufacturing and non-manufacturing sectors rebounded in March. This is a positive sign because China is the biggest oil market in the world.
Another catalyst is that the US, which is the biggest oil producer has started to produce less oil. A report by Baker Hughes said that the number of oil rigs in the country declined at the fastest pace in years. Another report by Goldman Sachs said that the action by US producers has removed more than a million barrels of oil from the market.
Still, the oversupply concerns are rife. Recent reports have said that big onshore oil storage firms are running out of capacity. Ending this situation while facing low demand and more production will be challenging.
As of this writing, the price of WTI crude oil is up by more than 5% while Brent is up by 2%.
Read our Best Trading Ideas for 2020.
On the four-hour chart, we see that the price of UKOIL found an important support at 25.70, where it formed a double bottom. The pair is also forming a descending triangle pattern, which is nearing its tip. This means that a breakout in either direction could happen in the near term.
The price will be in a bullish trend if it breaks the important resistance level of 28.00. If this happens, I expect the price to retest the important level of 30.00. On the flipside, I expect the downward trend to prevail if the pair breaks the support at 25.70.