A disappointing week and an amazing rebound!
Last week oil market was surprisingly down as virus fears took all over the market. On the other hand, weaker than expected economic data had some signs of slowing the recovery pace.
At the beginning of the new week, when the Chinese announced 0 infected Covid-19, market sentiment changed on the virus front and this sentiment got supported by officially confirming the Pfizer-BioNTech vaccine by US FDA.
The oil market was positive o Monday and rebounded strongly from its low level by more than 6% on Monday to $65.50 at the closing time, recorded its biggest one-day gain in five months. However, the oil price still recorded a decline of more than 16% from the high seen last month. This increase moved forward today by another 2.2% to touch $66.81 earlier today.
The market always is effecting by Supply and Demand. We have some reports in different media that Saudi Arabia is considering suspending production increase in response to the recent threat of the Delta variant virus to market demand. In addition, Hurricane Grace hitting the coast of Mexico, that can affect local crude oil production. On the other side, despite the strong rebound in oil demand from India, data are showing that oil demand from China has declined.
However, the market remains optimistic about the macro economy and oil market. Among them, Rabobank expects that speculative long positions will be established at low points one after another after the systematic sell-off and will push oil prices higher after the trigger. These speculative positions may come from the market`s fading of concerns about the Fed`s early tapering the asset purchases. They believe that Fed Chair, Mr. Powell will repeat his dovish stance at the Jackson Hole meeting this Friday to emphasize that it is still soon to start tapering.
Global economic growth is also showing signs of slowing down. Yesterday`s published PMI numbers from Australia, Japan, EU, UK and US, all confirmed the idea that we have still a long way to full recovery. The data reflects that service providers and manufacturers still facing supply challenges, which will drag down the overall global economic growth.
In short, market sentiment is getting more positive these days, however, the main question will be Friday`s PCE numbers and FED Chair`s Speech.
From a technical point of view, RSI moved above 60-level with an increasing OBV trend line. $64 and $56.50 are the main support levels at the moment and as long as USOil is trading above $64, we can see the clear uptrend in the chart.