U.S. West Texas Intermediate crude oil futures are trading lower on Friday after hitting their highest level since December 7 earlier in the session. Profit-taking is likely behind the weakness. However, there are still lingering concerns over rising U.S. production, and key issues with China that have to be resolved despite favorable trade talks earlier in the week. Underpinning the market are the OPEC-led production cuts.
OPEC and its major ally Russia began reducing output by 1.2 million barrels per day on January 1. It they maintain their discipline, this move should trim the global supply glut and stabilize prices.
Earlier in the week, the US and China ended three-days of constructive trade talks which were productive enough to lead to the scheduling of further negotiations later this month. This news has created enough optimism to drive short-sellers out of the market.
The bearish traders are saying that profit-taking and short-covering have been driving prices higher rather than aggressive counter-trend buyers.
They are also expressing concerns over the health of the global economy especially in China where growth in 2018 and 2019 is expected to be the lowest since 1990. This could pressure demand.
Furthermore, most analysts have downgraded their global economic growth forecasts below 3 percent for 2019. This will also be bad for demand.
Finally, the biggest concerns for bullish traders…