U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Friday, threatening to erase this week’s gains just one day after the markets hit a four-month high. The price action is being driven by uncertainty over domestic and global economic growth on future demand. Despite the worries, the market continues to be supported by the OPEC-led supply cuts and the U.S. sanctions against Iran and Venezuela.
On Thursday, both WTI and Brent crude oil hit new highs for the year, but both showed little follow-through to the upside when they took out the previous day’s high. In fact, both closed lower which indicated the selling may be greater than the buying at current price levels. The price action also suggested investors aren’t willing to buy strength at current levels.
When investors aren’t confident enough to buy strength, it usually means they are waiting for a catalyst. They have probably grown tired of the narrative about the “OPEC-led production cuts underpinning the market” and would probably like to hear some positive news about the progress of U.S.-China trade talks.
Until they get this news, we’re likely going to see a lot of “backing and filling” on the charts as bullish investors are becoming more cautious about chasing the market higher and would most likely prefer to buy on breaks rather than on strength.
Renewed Concerns Over Demand