Crude recovers
Crude oil has managed an impressive bounce over the last ten sessions. Earlier this month, front-month WTI broke below $65 per barrel to trade at its lowest level since May last year. Front-month Brent hit its lowest level since December 2021. The latest sell-off took both markets into very oversold territory. Since then, oil has rallied sharply, with WTI, as of Thursday’s high, up around 10% from its recent low. Has crude finally bottomed? It’s still too early to know. Prices have pulled back a touch this morning, but not significantly. Oil could continue to rally from current levels, but it will be its next pull-back which will help decide if the bottom is in. If it’s relatively modest and falls significantly short of last week’s $64.80 low, then that would certainly increase the probability that it is. If not, then there’s an increased likelihood of another lower low before it’s safe to sound the ‘all clear’. Overnight, China refrained from lowering its 1 and 5-year Loan Prime Rates. But on the other hand, the US Federal Reserve has made it clear that its prepared to cut rates further. As long as these aren’t a precursor to weakness in the US economy, then they may help to lift sentiment, and oil prices. Unless, of course, they trigger increased production.
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