U.S. West Texas Intermediate crude oil futures are showing signs of a successful support base on the daily chart, but are still in a position to close lower for the week. Nonetheless, the rally on Friday after a steep sell-off on Wednesday suggests the worst of the recent selling may be over at least in the short-run.
The market had been pressured throughout the week amid concerns that global economic weakness will lead to lower demand. However, losses are likely being limited by worries that an escalation of tensions between the U.S. and Iran will lead to a supply disruption.
It seems this week that each piece of potentially bullish news was outweighed by a developing concern.
Earlier in the week, OPEC and its allies agreed to extend their plan to trim production, reduce inventory and stabilize prices for nine-months, or until March 2020. On paper, this is potentially bullish. After all, virtually the same strategy has been holding up prices since January 1. However, some traders wanted to see bigger cuts to offset increasing U.S. shale production.
On Wednesday, the U.S. Energy Information Administration (EIA) reported a weekly decline of only 1.1 million barrels in crude stocks. This was lower than the forecast and much smaller than the 5 million barrel draw reported late Tuesday by the American Petroleum Institute (API). The discrepancy suggests that oil demand could be slowing amid signs of a weakening U.S. economy.
With data from the EIA…