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Crude Oil Prices Up Slightly on Improved Risk Sentiment

Brent Crude Oil Calm Ahead of US Oil Rig Count Data
Brent Crude Oil Calm Ahead of US Oil Rig Count Data

Crude oil prices are up on Monday as improved risk sentiment takes hold of the markets following the limited US-China trade deal and upbeat Chinese Industrial Production data. China’s Industrial Production rose to 6.2%, well above the 5.1% predicted by analysts and also far above the 4.7% registered a month earlier. Retail sales in China also climbed to 8.2%, above the 7.6% forecast and the 7.2% seen in the last month.

Crude Oil Benefiting from Improved Risk Sentiment

Both upbeat data have increased hopes that the Chinese economy, which has been stagnant for some time now, could start to pick up. These hopes have been reinforced by the limited phase 1 US-China trade deal, which has reduced tariffs on nearly $600billion worth of Chinese exports to the US. Even though the deal does not seem to have covered all the bases that the Chinese would have wanted, it is being seen as a cautiously good step towards resolving the 18-month US-China trade dispute.

Markets have responded with increased risk sentiment, with crude oil and the US markets all registering gains on Monday. WTI crude oil is trading at $60.21 as at the time of writing, and other crude oil baskets such as the Brent crude, Mars US, OPEC Basket, DME Oman and Urals are all gaining on the day.

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Technical Outlook for WTI Crude Oil

The analysis for the WTI crude oil blend indicates that price activity is now violating the upper border (i.e. return line) of the ascending channel on the daily chart. We need to see a definitive close of the price candles above the return line for a channel break to be confirmed. This must be in the form of a 3% penetration close to the upside on the weekly chart, or two successive candle closes above the return line on the daily chart.

A successful upside break of the channel could lead to attainment of the July 11-13 highs of 60.75. Further upside break of this level would then target the 63.47 mark.

On the flip side, a failed break of the channel takes price back into the channel, where it has a chance to target the July 3) and September 24 highs of 58.51. Further downside creates potential for price to target 55.65, with a break of the channel’s trendline targeting 54.15 (previous neckline of June/July 2019 double bottom).