Crude oil price rose as the market continued to digest the deal signed between OPEC and other producing countries during the weekend. The deal will see almost 10 million barrels of oil removed from the market in May and June.
The market also reacted to trade news from China. Data from the country’s statistics office showed that the country’s exports declined by 6.6% in March. This was better than the February’s decline of 17.2% and the consensus estimates of 14%.
Imports declined by 0.9% in March, which was better than the expected decline of 9.5%. It was also better than the 4% decline that happened in the previous month. As a result, the country’s trade surplus widened to more than $19 billion in March after declining by more than $7.7 billion in February.
China matters a lot in the oil industry because it is the biggest importer in the world. As such, increased business activity sends a signal that demand is rising.
Still, oil market has struggled after the OPEC+ deal because investors are worried about three things. First, they are worried about demand, which has fallen by more than 30% this year. As more countries remain in shutdown, the demand could see significant declines. Second, they are worried about cheating in the deal. Iraq and Nigeria have cheated in the past deals. Third, the market is worried about the timetable of the deal. In the signed deal, the 10 million barrels will be cut in May and June and then drop to 8 million.
Looking at the four-hour chart, we see that the crude oil price has struggled before and after the deal was reached. The price struggled to move above the important 38.2% Fibonacci Retracement level of 36.34. It has also struggled moving below the 23.6% Fibonacci level. This Fibonacci has been drawn by connecting the highest and lowest swings in March.
I expect the bearish trend to continue if the price moves below the 23.6% retracement level of 30.65. On the flipside, the upward momentum could start if the price breaks above the 38.2% level of 36.35.