Throughout June oil has slowly moved higher from a three month low below $60, however it has now returned to that level and will be relying on support again. In early June, oil did well to consolidate by trading in a narrow range roughly between $60 and $63, after falling sharply in the few weeks before, and it may just do this again.
Throughout the second half of May oil fell sharply from around the key $71 level down to its lowest levels in four months below $60, before a subsequent rally. In the few weeks leading up to the fall, it had eased lower from its six months highs above $75.50 to trade back around the $71 level, which it traded around for a few weeks. Prior to reaching the six month high, oil had met some resistance around the $71 level before breaking higher.
Of more significance is the $68 level which provided strong resistance earlier this year and subsequently supported oil in May, however this level was strongly broken through on its way to the recent four month low. Throughout February and March oil was trading in a narrow range meeting resistance at the key level of $68 and did well to finally surge higher through this level. The $68 level will sit on the sidelines and possibly be called upon to offer some resistance should oil rally further.
Rising tensions in the middle east and the world’s most important oil chokepoint doesn’t have everyone concerned about oil prices. However, it was a tweet from U.S. President Donald Trump that presented oil prices a boost. President Trump vowed to impose more tariffs on Chinese imports, which are due to take effect on 1st September. The 10% tariff would be imposed on $300 billion of Chinese imports and could raise tariffs further if China’s President Xi Jinping failed to move more quickly toward a trade deal. The tweet has only served to intensify the trade war between the world’s top two economies and oil consumers, and any resulting economic slowdown could hurt crude demand. The announcement extends U.S. tariffs to almost all imported Chinese products, and China responded by saying they would not accept “intimidation or blackmail”, promising countermeasures. China have since responded by allowing its currency to slide below the key 7 yuan to the dollar level, for the first time since 2008. China also stopped new purchases of U.S. agricultural products, according to state run media. Once the top buyer of U.S. crude, China had slashed its purchases last year as the trade war dragged on.
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