Commodity Market: US Crude Oil recovers from earlier losses as US-China trade deal fears subside, oil demand seen improving at BofA

Futures on US West Texas Intermediate Crude Oil recovered from losses registered earlier on Tuesday in volatile trade, induced by confusion over the fate of the US-China trade agreement.

Comments from White House trade adviser Peter Navarro that the trade deal is “over” initially triggered a selloff in equities, riskier currencies and oil. However, later Navarro issued a statement, in which he said he had been “speaking to the lack of trust” in China’s administration and his remarks had been “taken wildly out of context.”

Risk sentiment also improved after assurances regarding the trade agreement provided by US President Donald Trump. He tweeted: “China trade deal is fully intact. Hopefully they will continue to live up to the terms of the agreement.”

Meanwhile, Bank of America Global Research has raised its oil price forecast for 2020 and 2021, as it sees demand for the commodity recovering after pandemic-related shutdowns.

The bank now projects an average price of $39.70 per barrel for WTI Crude Oil in 2020, up from a prior forecast of $32, while the average prices for 2021 and 2022 are now expected at $47 and $50 respectively.

For Brent Oil, Bank of America Global Research now forecasts an average price of $43.70 per barrel in 2020, up from a prior estimate of $37, with the average prices for 2021 and 2022 now projected at $50 and $55 respectively.

“As we head into next year, we believe transportation demand could recover at a faster rate than we initially anticipated,” BofA said in an investor note.

“We also think that OPEC+ will likely hold back larger supply volumes than we anticipated three months ago.”

In terms of supply, US and Canadian oil and gas drilling companies have reduced the number of rigs in operation to a record low. The latest data by Baker Hughes Co showed the number of US oil rigs, contracted for drilling, had decreased by 10 to 189 during the past week, or a count not seen since June 2009.

As of 9:30 GMT on Tuesday, WTI Crude Oil Futures were gaining 1.38% to trade at $41.12 per barrel, after earlier rising as high as $41.21, or a price level not seen since March 9th ($41.51). WTI Crude futures have risen 3.77% so far this week, following another 8.00% gain in the preceding week.

Brent Oil Futures were up 1.12% on the day to trade at $43.46 per barrel, after earlier surging to $43.56, or a price level not seen since March 6th ($50.42). Brent futures have gained 3.29% so far this week, following another 7.60% gain in the prior week.

Daily Pivot Levels (traditional method of calculation) – Crude Oil

Central Pivot – $40.12
R1 – $41.20
R2 – $41.85
R3 – $42.93
R4 – $44.02

S1 – $39.47
S2 – $38.39
S3 – $37.74
S4 – $37.10

Daily Pivot Levels (traditional method of calculation) – Brent Oil

Central Pivot – $42.58
R1 – $43.56
R2 – $44.13
R3 – $45.11
R4 – $46.08

S1 – $42.01
S2 – $41.03
S3 – $40.46
S4 – $39.88