Crude Oil Pops on Trade Deal Hopes—Is More Upside Ahead?

Crude Oil Futures (September Futures)

Friday’s Settlement: 65.16, down -0.87 [-1.32%] for the day, -0.89 [-1.34%] for the week

Market Movers:

Trade uncertainty
Bullish EIA report / Glosupply levels
Macro concerns
Chevron / Venezuela News
Crude gave back all of Thursday’s rally to finish the week lower by -0.89. Futures were strong on the overnight session coming into Friday, but were sold heavily at the start of the US session.

Position squaring into a weekend fraught with trade negotiations and news out of Venezuela / the Trump administration was cited for the fall on Friday.

In Venezuela, Chevron was granted permission by the US government to resume pumping and exporting crude. This was pretty unexpected news, catching markets off guard.

Today, futures are trading +1.06 [+1.63%] to 66.12

Market Movers:

US – EU trade deal
90 Day Chinese tariff delay
On Sunday, President Trump and the EU’s Von der Leyen finalized a trade agreement that lowered tariffs on EU products to 15% in exchange for $750 billion of US energy products over the next three years (amongst other things). The deal is simultaneously positive for WTI fundamentals while killing negative sentiment around the possibility of a “no-deal” scenario.

The US also issued a 90-day delay on instituting China tariffs . The possibility of a trade deal, or at least cooler tensions, is gaining some steam.

Both headlines surrounding trade policy are quite bullish oil markets as well as risk-assets. The trade now is to determine how much of this good news is already priced in.

The Dollar has reacted strongly – higher by 0.57% on the Day (DXY). If we do get a snap-back in the Dollar, it could be a headwind to the rally we’ve seen across commodities. But, if a China deal does get done, and energy products are involved in the final deal, Crude, and WTI specifically, could see a sharp acceleration to the rally.

Data Releases:

Technical Analysis:

Futures held our key support Friday despite finishing near the lows for the week. The positive news over the weekend has driven futures higher in the overnight, albeit modestly.

The EU trade deal should be bullish for US crude, but the snap-back in the Dollar is also weighing on this bullish move.

We remain bullish fundamentally and technically – viewing risk as being skewed to the upside.

For intraday levels, our pivot and point of balance is set at…