The price of oil is struggling in an environment where trade war risks are dampening the prospects of traction with respect to the global growth outlook. The IMF cut its growth forecasts for the global economy for this year and next predicting growth of 3.2% in 2019, down from its April forecast of 3.3% which was the prior lowest level since the financial crisis. It will be of no surprise that these are cut again in the near future due to significant downside risks to the world economy including trade tensions, pockets of political instability, mounting debt levels and increasing inequality. Indeed, momentum signals are firming to the downside in the energy sector, leading to commodity trading advisors, to ramp up their shorts in Brent and the US benchmark. Meanwhile, Iranian President Hassan Rouhani yesterday called upon the US to lift all the sanctions if they want to hold talks and called a war with Iran "the mother of all wars," suggesting that the tension is likely to remain high in the Middle East, which could cause more supply disruptions and allow Crude oil limit its losses.
Crude oil prices were under pressure again during yesterday’s session and edged lower below the trend line presented on the chart before stabilizing this morning in the $53.3 territory. The price is currently trading just above the $53.24 support level with a bearish momentum who’s got more room to go down before entering the oversold zone. We will keep focusing on the downside but we have to be careful if this break to the downside turns out to be a false one. The next level to watch will be the $52.5 support level.
Support: 53.26/ 52.5
Resistance: 53.89/ 54.42