Crude oil prices moved higher today on concerns over a protracted trade war with Beijing. Oil is trading at roughly $61.70, down just under 3/4 of a percent on the day.
Concerns over the U.S.-China trade dispute initially shifted the weekly decline in U.S. crude inventories reported Wednesday. However, traders have continued to watch growing tensions between the U.S. and Iran, which could disrupt Middle East output and drive oil prices higher.
“The escalation in the trade war has put a return in global growth worries, which would translate to softer crude demand,” said Edward Moya, senior market analyst at Oanda.
However, “optimism is still greater for a deal to get done soon, than for talks to fall apart, so the trade story could shortly become a tailwind for crude,” he said. Also, “Chinese goods that left ports before May 10th are not subject to the increase, thus providing a small, roughly two-week window that could provide added incentive for a deal to be finalized.”
“While investors try to read the potential effects of US tariffs on imports and their impact of economic growth, the attention on the Iranian situation and the 60 days ultimatum also remains high,” wrote Carlo Alberto De Casa, chief analyst at ActivTrades, in a Friday research note.
Another factor that may be affecting the oil market is a decline in active oil and gas rigs. The number of active oil and gas rigs fell again in the United States this week according to Baker Hughes, following a collection of losses in the weeks prior, maintaining the overall rig count considerably below year-ago levels for a fourth week in a row.
“Oil has been unable, so far, to exit the lateral trading range that has compressed volatility in the last few days, holding prices between $60 and $62.8. A clear break out of this second level would open space for further recoveries, with a potential target of $64,” said De Casa.
Nonetheless, oil prices have surged thus far in 2019 as evidenced by the performance of oil-focused leveraged inverse ETFs. For traders who sense that oil prices have dipped enough to present a perfect buying opportunity, might consider the following leveraged ETFs: UWTI, USOU, WTIU, and WTID.