Crude prices are rising moderately above $45 per barrel of Brent crude benchmark amid cautious optimism in the market. The VIX Volatility index weakened by 4.2% to 21 points on Tuesday.
Market inclination to risks is rising as additional liquidity from another stimulus package is expected. U.S. President Donald Trump wrote in his Tweeter that Democrats had reached out to the White House to restart negotiations on coronavirus aid. "So now Schumer and Pelosi want to meet to make a deal. Amazing how it all works, isn’t it," Trump tweeted. However, Senate Minority Leader Charles Schumer denied they called Trump on this issue. “I didn't call him. Speaker Pelosi didn't call him. No, we didn't call him," Schumer said on MSNBC's Morning Joe when asked about the president's assertion.
The CPI index rose in China. It recorded a 2.7% climb in July year-on-year vs 2.5% in May. The increase in the index indicate the increase of business and consumer activity in the country that is a major crude consumer.
Besides, the U.S. Dollar continues its depreciation, which may be because of the fears surrounding the pace of the economic recovery in the United States due to the pandemic situation. This may be prompting an additional boost for oil prices denominated in the weakening Dollar. They are also supported by increasing flight intensity. According to Flightradar24 the number of flights on August 9 is 170% above the same reading in mid-April.
Nevertheless, the upside gain is quite modest, and there are several other reasons which may also contribute to these slight gains. Tensions between the United States and China are rising ahead of the review of the Phase One performance check on August 15. Rising fears over the worsening pandemic situation in Europe, the U.S. and Latin America are putting pressure on crude prices too.
OPEC+ members and allies increased crude output by almost two million barrels per day this month according to the renewed agreement. Rising crude prices stimulate oil production by U.S. shale producers. As a result, the overhang of crude supply may be retained for the near future.
Technically speaking, a strong resistance level of $46-46.3 per barrel may hold prices from further climbing. In the case that it is broken through, prices may surge to $47-48 per barrel. The lower margin of $44.3 represent a support level. If this level is passed then Brent prices may follow a correction to $42-43 per barrel. The most likely range for crude price movements for today may be concealed within the existing range of $44.5-45.8 per barrel.
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