WTI regains poise to test $51 amid US-China trade optimism, up +2%

• Bounces-back on risk-on trades fuelled by US-China trade optimism.
• All eyes on the US EIA crude inventories report for further trading impetus.

Having consolidated briefly over the last hour, WTI (oil futures on NYMEX) met fresh demand and swung back higher to test the 51 handle, the best level in three weeks.

The latest leg higher in the black gold can be attributed to the fresh updates on the US-China trade talks, with the Chinese Foreign Ministry citing that both sides had serious talks. The report spurred a fresh risk-on wave across the financial markets in Europe and boosted the higher-yielding oil. Note that China is the world’s no. 2 oil consumer.

The prices also continue to derive support from the OPEC led output cuts that come into force this month while a broadly weaker US dollar, in anticipation of a dovish FOMC minutes, also added to the upside in the USD-denominated WTI. Further, a drawdown in the US crude stockpiles also strengthened the sentiment around the barrel of WTI. The API reported late Tuesday that the US crude supplies fell by 6.1 million barrels for the week ended Jan. 4

Focus now remains on the US EIA crude stockpiles report due on the cards later on Wednesday for fresh trading opportunities ahead of the key FOMC minutes release.

WTI Technical Levels