Brent crude oil snapped a four-day winning streak to end with losses on August 30 as new tariffs back on the table.
As the US new tariffs on Chinese imports kicked in Sep1, raising concerns about the demand for oil back on the table. According to the Nikkei Asia Review, the new China tariffs, raising levies to pre-WWII level.
Ongoing global trade tensions with slower world economic growth and could cause the supply-demand mismatch in the coming months. Besides, OPEC posts first 2019 oil-output rise despite Saudi cuts, Reuters reported. These two events suggest raising concerns about demand for crude oil in the near future. However, last week’s inventory data and the oil rigs data from Baker Hughes suggests demand remains healthy. We believe Trade war is a bigger concern than the supply and demand issue. We buy the optimism around a trade deal.
The weak daily RSI and the bearish turnaround of the daily oscillator should cap the rallies in the coming days. Against this backdrop, a lasting break below of the $57.40 could deepen the fall to support at $55.70.
Note that a break below August low would underpin bearish momentum, paving the way for a decline to $50.00 level.
We stick to our two -week old forecast, “The inability of the oil price to sustain above the critical resistance of 61.25 could be a negative indication for the bulls.”.
As Brent crude oil has been trading above 200MA (Weekly) and 50 MA (Monthly) standing at $57.70 for the fifth straight week, one can opt a neutral stance from bearish. The near-term trend remains in a narrow range between 61.20-55.75 levels.
It is important to always keep in mind the risks involved in trading with leveraged instruments.
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