4 factors moving oil prices
Oil was on the front foot at the start of the New Year, however the push higher has been short lived.
Share this:
Oil was on the front foot at the start of the New Year buoyed by the prospect of a signed US – China trade deal and rising tensions in the middle east, in addition to shrinking stockpiles and the start of deeper OPEC plus production cuts. However, the push higher has been short lived.
1. Middle Eastern tensions. An Iran back Iraqi militia withdrew from the US embassy in Baghdad after storming it in protest over airstrikes. Elevated tensions involving Iranian backed forces has increased geopolitical risk in the region. However, there is no immediate threat to Iraq’s oil supply so the move higher could be short lived.
2. Trade deal. The US – China trade deal is expected to be signed on 15th January. Strong indications that the first phase trade deal will be signed and formally entered into within the coming weeks is boosting sentiment towards the global economic outlook and to a degree lifting expectations for future oil demand.
Realistically though, traders will want to see this optimism reflected in stronger data before we see a meaningful advance in oil prices.
Realistically though, traders will want to see this optimism reflected in stronger data before we see a meaningful advance in oil prices.
3. Production cuts. This month also sees the start of deeper production cuts agreed by the OPEC plus group at the end of last year. This move has already been priced in. Of more concern was data showing that Russian output reached a post-Soviet high last year. Despite curbing production under the OPEC plus agreement and being one of the architects, Russia has a poor record of fulfilling its pledge.
4. Fall US Inventories. A decline in US inventories last week lifted the price of oil. API report showed that US crude stocks fells 7.8 million barrels week ending 27 December, significantly greater than the 3.2 million forecast. Investors are now awaiting Friday’s EIA crude stock data for fresh direction
Levels to watch:
After starting 2020 on the front foot WTI is showing evidence of weakness. Falling volumes raise doubts over bulls strength going forwards. After failing to break through resistance close to $61.50, the bulls have lost momentum and WTI has seen heavy selling over the past hour. WTI has fallen below 50 SMA although remains firmly above 100 SMA and 200 SMA. Oil bulls need to push through $61.50 to open the door to $61.95 and $62.31. A breakthrough support at $60 could negate the uptrend.
Oil was on the front foot at the start of the New Year buoyed by the prospect of a signed US – China trade deal and rising tensions in the middle east, in addition to shrinking stockpiles and the start of deeper OPEC plus production cuts. However, the push higher has been short lived.
1. Middle Eastern tensions. An Iran back Iraqi militia withdrew from the US embassy in Baghdad after storming it in protest over airstrikes. Elevated tensions involving Iranian backed forces has increased geopolitical risk in the region. However, there is no immediate threat to Iraq’s oil supply so the move higher could be short lived.
2. Trade deal. The US – China trade deal is expected to be signed on 15th January. Strong indications that the first phase trade deal will be signed and formally entered into within the coming weeks is boosting sentiment towards the global economic outlook and to a degree lifting expectations for future oil demand.
Realistically though, traders will want to see this optimism reflected in stronger data before we see a meaningful advance in oil prices.
Realistically though, traders will want to see this optimism reflected in stronger data before we see a meaningful advance in oil prices.
3. Production cuts. This month also sees the start of deeper production cuts agreed by the OPEC plus group at the end of last year. This move has already been priced in. Of more concern was data showing that Russian output reached a post-Soviet high last year. Despite curbing production under the OPEC plus agreement and being one of the architects, Russia has a poor record of fulfilling its pledge.
4. Fall US Inventories. A decline in US inventories last week lifted the price of oil. API report showed that US crude stocks fells 7.8 million barrels week ending 27 December, significantly greater than the 3.2 million forecast. Investors are now awaiting Friday’s EIA crude stock data for fresh direction
Levels to watch:
After starting 2020 on the front foot WTI is showing evidence of weakness. Falling volumes raise doubts over bulls strength going forwards. After failing to break through resistance close to $61.50, the bulls have lost momentum and WTI has seen heavy selling over the past hour. WTI has fallen below 50 SMA although remains firmly above 100 SMA and 200 SMA. Oil bulls need to push through $61.50 to open the door to $61.95 and $62.31. A breakthrough support at $60 could negate the uptrend.
Related tags:
Latest market news
The complete CFD trading experience
Award-winning platforms, competitive spreads, low commissions and dedicated support.
We live and breathe the markets and are dedicated to helping traders realise their ambitions as we continue to set the industry bar.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
S&P 500 Forecast: SPX rises after cooler-than-expected inflation data
U.S. stocks are rising and Treasury yields are falling after data showed that inflation increased at a cooler pace than expected, while U.S. consumer spending rose again in August.
Treasury Yields Lose Momentum as Energy ETF Retreats
The 10-year Treasury yield is testing a resistance zone respected since the 1920s, as bearish RSI divergence signals fading upside momentum.
GBP/USD, Oil Forecast: Two trades to watch 300926
GBP/USD: Can Stronger UK Growth Offset the Dollar’s Advantage? Oil: Supply Recovery Challenges the Geopolitical Premium.
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.