- Oil sold-off into renewed US-China trade tensions, OPEC output boost threat.
- Will firmer USD cap the oil-price rebound?
- The OPEC June 22nd meeting remains the key event risk this week.
WTI (oil futures on NYMEX) stages a minor comeback from two-month lows reached at $ 63.41 in early Asia, as upbeat forecasts released by Goldman Sachs and Libyan news offer the much-needed support to the prices.
Libyan oil storage hit in new fighting at Ras Lanuf - Reuters News
In its latest client note, the US banking giant, Goldman Sachs, noted that it sees moderately tighter oil market through Q2 2019. The bank added, “the oil market remains in deficit ... requiring higher core OPEC and Russia production to avoid a stock-out by year-end.”
However, it remains to be seen if the black gold manages to sustain the recovery, as expectations of the output increase by the OPEC and non-OPEC producers continue to threaten the oil bulls while escalating US-Sino trade tensions also weighs down negatively on the higher-yielding asset, oil.
The US imposed hefty tariffs on $50 billion of Chinese imports, starting on July 6. In retaliation, Beijing said it would slap duties on the American export products, including crude oil.
Meanwhile, persisting broad-based US dollar demand amid trade worries induced risk-aversion also undermines the sentiment around the barrel of WTI. A stronger greenback makes the USD-sensitive oil more expensive to the buyers in foreign currencies.
Looking ahead, all eyes remain on the OPEC and its allies June 22nd meeting held in Vienna, where they will decide the forward output policy. In the meantime, the US dollar trades and US weekly crude supplies data will drive the oil markets.
WTI Technical Levels
Joshua Gibson, FXStreet’s Analyst noted: “64.00 represents a major level for WTI prices, and a breakdown below this level will quickly see oil tumbling into the last major swing low near 61.80, but a recovery for WTI could see a rebound into 66.50, a level that has proven troublesome for the commodity in both January and March of this year.”
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