Oil is extending gains from the previous session on Thursday, adding 1% to Wednesday’s 2.5% lift. This is the first time in over two weeks that oil has advanced for two consecutive sessions.
Down 16% YTD
To say oil has had a bad start to the year would be an understatement. Despite the signing of the US -China first phase trade deal which was expected to boost future demand expectations, WTI has shed over 16% of its value year to date. However, these losses have come about over the past three weeks.
Coronavirus fears and its potential impact on Chinese economic growth has hit the price of oil hard. This is because slower growth in China, the second largest global consumer of oil would hit future demand significantly. Between January 20th – 4th February, the price of oil sunk over 17.5%, with just one day of gains across the period.
Coronavirus vaccine breakthrough & strong US data
Yesterday’s news of a coronavirus vaccine breakthrough was therefore well received by oil traders. Optimism that a cure to the lethal virus will be produced soon has helped abate fears over coronavirus and consequently future demand of oil.
Additionally, data from the US (the largest consumer of oil in the world) showing the US economy to be on a solid footing also supported the price of oil. ADP revealed a staggering 291,000 private jobs were created in January. ISM non-manufacturing index jumped to 55.5 last month the highest level since August.
Not even higher than expected crude oil inventories were able to cap oil’s gains. The EIA reported a surplus of 3.4 million barrels last week, ahead of the 2.9 million expected.
Levels to watch
Oil has moved above the its falling trend line on the 1 hour chart. After rebounding off yesterday’s low $49.25, oil has made series of higher highs and higher lows.
Immediate resistance can be seen around $52.16 (today’s high). A close above this level could see oil push towards ascending trend line resistance at $53.
On the downside, a move below support from the descending trend line around $50.20 could indicate the bears are in control and look to test $49.25.