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  • WTI topping out the October rally at the $62 handle. 
  • Bullish fundamentals should underpin the upside above 200-DMA.

Oil prices on a spot basis are lower on the day, currently, -0.42% having travelled from a high of $61.44 to a low of $60.63. The price has morphed into toppish looking pattern on the charts although the fundamentals will likely to continue supporting an upside bias as developments in the Middle East point to prospects for crude supply disruptions.

Moving into 2020, investors are expecting higher inflation due to central bank policy measures throughout the world. “The reflation trade is being reflected in energy markets as participants hope that the trade deal will reduce the expected surplus for the next few quarters, as demand gets a boost from its low expectations,” analysts at TD Securities explained while also noting OPEC+.

“OPEC+ delivered a ‘beautiful surprise’, which combined with expectations of lackluster supply growth from US shale, has sent WTI crude barreling through $60/bbl. In response, CTA funds continue to load up on energy markets with WTI crude and heating oil still expected to see a buying program ensue for the next few days.”

Sino/US trade euphoria to wear off

Meanwhile, prices can find supportive on the People’s Bank of China announcing that the central bank would provide additional stimulus to the economy, this in turn boost prospects for a higher demand for energy. In the same vein, we have seen positives steps in the US and Chinese trade talks, although even if the trade negotiations continue to bear fruit, the overall image of the United States in China will face continuing challenges.

Firstly, we can expect a phase one trade deal to be signed in coming days, although with the November 2020 US presidential election where officials in Beijing say they don’t anticipate sitting down to discuss a phase two deal before the election – in part because they want to wait to see if Trump wins a second term. “It’s Trump who wants to sign these deals, not us. We can wait,” one Chinese official told Reuters. Thus, the euphoria of a phase one deal could see the speculative bid come under pressure. 

WTI levels