Oil roars back after hitting its lowest level since January overnight
- Saudi’s considering all options to halt oil drop
- Saudi Arabia speaking with other oil producers to discuss ways to halt oil prices slide
The rebound comes after the above headlines but also as markets are in a better mood so far to start the new day. Risk assets are looking more cheery and that is helping to give oil a bit of a lift as we begin European trading as well.
Of note, oil prices sank overnight with price hitting a low of $50.52 – the lowest since 14 January – but held on to a test of the June low @ $50.61. Price then recovered sharply and we’re seeing it trade more than 3% higher to $52.70 currently.
I reckon it’s a bit too early to determine if we have found a short-term bottom in oil and direction moving forward will be a fluid one as markets keep their focus on the US-China trade rhetoric ahead of the proposed meeting in September.
If trade talks are to continue, that will at least alleviate some pressure off risk sentiment despite China continuing to fix the yuan lower over the past week.
However, without any positive developments, the risk outlook remains cloudy and I reckon we may still see trade tensions escalate further from hereon. Such a scenario will bode ill for risk assets and oil in return over the next few weeks.
But for now, markets are taking in some comfort that things are finding some steadiness as we adjust to the new norm. Technically, if oil can move back above the broken trendline support @ $52.85 today then buyers will have more room to roam to the upside.