It has been a rollercoaster trading week for oil markets as investors tussled with conflicting fundamental themes pulling and tugging at the commodity.
Oil prices initially collapsed roughly 4% mid-week thanks to an unexpected rise in US crude stockpiles and gloomy outlook for global oil demand. Bulls were later thrown a lifeline after geopolitical tensions in the Middle East rekindled concerns over potential supply shocks. Oil markets are poised to remain highly sensitive and reactive to supply and demand side factors ahead of the OPEC meeting this month. With oil trading at depressed levels despite the recent rebound, OPEC+ may have no other choice but to extend supply cuts in an effort to prevent any further downside shocks.
Looking at the technical picture, WTI Crude is trading marginally below $53.00 as of writing. Repeated weakness below this level is likely to encourage a decline towards $52.00 and $50.60.
Dollar steady ahead of retail sales
The Dollar edged higher against a basket of major currencies today as trade tensions and global growth concerns supported the flight to safety.
While the Dollar is likely to remain supported by safe-haven flows amid persistent trade tensions, the question is for how long? With the Fed speculated to cut interest rates and recent economic data from the United States nothing to celebrate about, the Dollar is running on borrowed time. Much attention will be directed towards the latest US retail sales figures on Friday which should offer insight into the health of the US economy. Should the report disappoint, the Dollar is likely to weaken as expectations mount over the Federal Reserve cutting interest rates this year.
Commodity spotlight – Gold
This has been a mixed trading week for Gold due to the growing sensitivity of global risk sentiment.
However, the precious metal has the potential to conclude the week on a positive note if the pending US retail sales report fails to hit market expectations. Looking at the technical picture, Gold is likely to test $1347 if $1324 proves to be a reliable support.