Market Overview

7 October 2020

Crude Prices Seen to Trip on Trump’s Words

Crude prices slipped up in the middle of the week as risk on sentiment weakened. Since the beginning of this week rising appetite for risk lagged behind higher stock markets and crude prices. Brent crude benchmark climbed from $39 per barrel to almost $43 amid optimism as U.S. President Donald Trump quickly recovered from COVID-19, which he tested positive for last Thursday. Another reason for optimism was the assumption that  negotiations over a coronavirus relief bill up to $2.2 trillion was seemingly reaching an end .

However, Trump himself suddenly reversed the positive vibe by saying that negotiations over the disputed bill will be resumed after the presidential election in November. Probably he assumed that such stimulus measures are in favour of his Democratic opponent Joe Biden since the Democrats have approved the relief bill in U.S. Congress. Joe Biden has significantly augmented his winning gap over Mr Trump recently after last week’s presidential debate in Ohio. Perhaps in response to this, Mr Trump announced via his Twitter account late on Tuesday that he will approve the relief bill soon after his presidential victory. A very strange escapade by the acting president. Trump acknowledges that the relief bill is much needed to bolster economic recovery, but he probably doesn’t want  it to seem like the Democrats, and especially Joe Biden, took sole initiative for the bill.   Will this move increase Mr Trump’s chances for a victory? If Biden wins, the disputed bill will most probably be passed anyway. But the bill is urgently needed as the second wave of coronavirus infections is spreading over the United States, not in another month’s time. It is hard to assume what Trump is thinking about, but his support of the bill may score some additional loyalty points from the American electorate.

Nevertheless, risky assets turned red on the change of Trump’s rhetoric. It seems that investors are losing hope for swift stimulus measures that were already priced in. U.S. stock indexes dropped by 1.3-1.5%. Brent crude prices fell to a $42 per barrel level.

Another negative reason for crude came after American Petroleum Institute (API) reported crude reserves rose last week by 950,000 barrels vs a decline of 800,000 barrels a week before. Crude prices may react on the U.S. Energy Information Administration official crude reserves report that will be released later today. The Federal Reserve’s Federal Open Market Committee Minutes, that are also expected to be released on Wednesday, may also contribute to the movement of crude prices.

Technically Brent crude prices are locked within a range of $41-43 a barrel. However, a recent breakthrough technical support below $39 a barrel may hint to a possible downward trend, and the current upside rise may represent a pure technical correction. Moreover, the upside swing of Brent crude prices has not reached the recent high of $43.8 a barrel. So, a decline of Brent crude towards $41 a barrel and lower may be considered as a possible scenario.

 

Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2020 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. You may change your cookie consent or view our cookie declaration here.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.