U.S. West Texas Intermediate and International-benchmark Brent crude oil futures are trading higher for the week, but have given up more than half of their weekly gains since early Thursday. The selling pressure is being driven by concerns that simmering tensions between the United States and China will continue to exert pressure on demand, despite the announcement of the resumption of trade talks between the two economic powerhouses.
The price action on Friday suggests that perhaps the bullishness early in the week may have been an overreaction to the news about the resumption of trade talks and a government report showing a larger-than-expected drawdown in inventories. After all, these events were preceded by a weaker than expected ISM US Manufacturing PMI report that showed the sector contracted. The PMI report, hitting its lowest level in three years, led to renewed concerns over a U.S. recession.
This week’s fundamentals and the price action indicate the market has actually found a comfort zone where it’s not too bullish or too bearish. Buying dips and selling rallies seems to have become the norm for more than a month, and this type of price action is likely to continue until there is a trade deal in place, or the odds of a global recession increase.
The news this week was a combination of both bullish and bearish events with neither side strong enough to firmly establish a bona fide trend. This was the biggest influence on the sideways…