Oil prices continue to recover on higher demand expectations

Oil prices have extended the recovery, higher by 1.40% on the day so far, with spot WTI running up from a low of $55.44 to a high of $56.86.The price of Western Texas is tracking risk appetite, with US stocks on the up.  The benchmarks up over 1%, propelled higher in their own recovery this week following additional and positive trade war headlines.

Trade war risks simmering away, but decreasing

In trade today, Beijing said that it wouldn’t retaliate against the latest tariff increases and that further escalation of the trade war wouldn’t help the U.S., China, nor the global economy. 

Both the Dow and S&P 500  gained 1.3% shortly after midday, while the Nasdaq Composite was up 1.5%.  The 10-year bond price is higher, correcting from multi-month lows and is currently climbing at a rate of 2.99% at the time of writing. Today, the DXY is trading +0.30% higher. Finally, USD/JPY is higher by 0.49% and is extending yesterday's recovery and the recent low of 104.44, currently trading at 106.64.

Elsewhere, the Department of Energy, DOE, report was well received as the extra crude out of Cushing has been able to find export markets despite still unfavourable export differentials, and also find a home at US refineries as imports declined 1.29m bpd on the week. "This helped to offset the increase in production which rose to a new record high, as new pipes are likely allowing DUCs to be tapped in the Permian. In the medium term, the powerhouse in the shale patch should cap the upside created by OPEC's compliance to cuts which is running at 160%," analysts at TD Securities explained. 

WTI levels

Oil is on the rise, but it is still a far cry from the bullish territories towards the 60 handle on the daily outlook. The price is testing the upper GMMA band's resistance and is now above the 200-daily moving average. A close there does bring in prospects for a run to the 60 handle but failures here will leave the bears back in control that can target a drop to the 52 handle and the 61.8% Fibo at 51.70 on the wide.