Crude is rebounding on Wednesday, paring losses after two sessions of declines, however the losses at the start of the week were just a slight blip in an otherwise bullish charge. Crude oil has rallied 1.4% so far this week, extending gains on 3.4% in the previous week.
Oil is on the rise amid broad optimism that the hit from coronavirus will be short lived and amid supply concerns as the U.S. moved to cut more Venezuelan crude from the market.
Chinese manufacturers are starting to slowly ramp up again after strict lockdowns and restrictions to prevent the spread of the deadly virus. However, as the number of new coronavirus cases in China declined for a second straight day on Wednesday investors are growing optimistic that the hit will be a short-term blow. Reports that the Chinese are close to developing a vaccine is also supporting the price of oil.Rosneft SanctionsA U.S. decision to blacklist and sanction a trading subsidiary of Russia’s Rosneft has also underpinned the price of oil. According to the White House, the Russian subsidiary provides a financial lifeline to the Venezuelan government, as Trump continues his campaign against Maduro. Importantly this is a direct challenge to Moscow, one of Maduro’s key supporters. Russia’s response has unsurprisingly been a mix of defiance and accusations.Finally, oil is also being supported by the prospect of deeper OPEC++ cuts. The group meets next month and is expected to discuss its response to the possible downturn in demand owing to coronavirus. Suggestions that the group could limit output further could further boost oil.
Levels To watch
After dropping over 15% in January, WTI rebounded off $49.3 at the end of January and has been marching higher ever since.
WTI has pushed back above its 100- and 50-sma on the four-hour chart, it remains below the 200-sma at $55.1.
WTI is trading at the high of the day at $53.08. Immediate resistance can be seen at $53.30 (high 31 Jan.) prior to $54.30 (high 29 Jan.), before looking to target 56.
Near-term support is at $51.30 trend line support, prior to $50.80 and $49.30.
Oil At 2-Week High On Coronavirus Optimism, Rosneft Sanctions
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