Oil Analysis: price closes to $60 as US-China trade talk progresses

Crude oils price is trading around $57 – its highest in two months. Following the extension of the US-China trade truce, will the commodity gain further?

February 25, 2019, | AtoZ Markets – In a tweet by the US president Donald Trump, he said he will extend the trade truce agreement signed last year between the two big nations will beyond March 1. This means that the US government will withhold tariff increase on Chinese products. Oil was therefore supported and has found its way around $57 after gaining around 26% this year hoping the trade war between the US and China will be resolved soon.

OPEC has been at the forefront of Oil prices recoveries in the last 3-4 years. In 2015, WTI crude dropped to $26 following a supply glut. After a successful production cut by OPEC and its allies in the following years and the American sanctions on Iran and Venezuela, Crude oil price gained nearly 200% between January 2016 and September 2018 to trade at $77 per barrel. However, prices dropped drastically in Q4 2018 from $77 to hit $43. Price has gained bullish momentum since late December 2018 and now at $57.

WTI Crude Oil technical analysis and important price levels

The $77-to-$43 dip was very much expected after price completed a clear bearish pattern. From Elliott wave perspective, we expected that price would drop in the latter months of 2018. Before the crash to $43 started, we had an update on 25th July 2018, barely 2 months before the dip, when we used the chart below.

Oil Analysis

Price was just about to complete an ending diagonal 5th wave of a larger degree 5th wave of wave C (circled). The wave had a projection that the good rally that followed the oil production cut by OPEC was running out of steam. The last leg to ‘$77.5-78’ to complete the diagonal 5th wave before price crashed was the highlight. Price did exactly and crashed to prices ‘far lower than $60’ as expected. However, the 5th wave ‘ending diagonal’ didn’t complete but price morphed into an expanding diagonal 5th instead, as the chart below shows.

Oil Analysis

From the top of the expanding diagonal at $77, crude oil lost 45% of its value in just around two months. The drop from 77 to 43 seems to have ended with an impulse wave. If the current rally from around 43 ends corrective, there would likely be further price dips in the months that follow.

Will the current rally continue above $60?

Oil Analysis

The chart above shows the bullish correction that follows the impulse wave drive to 42.75. At least, a 3-wave bullish correction is very much expected. The current rally should continue into 50-61.8% fib-retracement levels between $60-64. A dip below the rising channel will most likely see the bearish run continue. Until that, oil prices will continue to mount up.

Meanwhile, Brent was down to $66.96 per barrel on the ICE Futures Europe exchange after hitting $67.12 on Friday. USDCAD which has an inverse correlation with crude oil has been on the downside since January.

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