WTI bounces back beyond $58.00 following upbeat stockpiles, mixed headlines

• WTI remains on the recovery mode during early Thursday.
• Larger than expected drop in the US oil inventories, phase-one deal signing in and the upcoming USMCA pleased the buyers off-late.
• Doubts over the US-China trade relations, political plays in Iran seem to cap the upside.

WTI stays mildly bid while taking the rounds to $58.25 during the early Thursday. The black gold recently recovered after the weekly report from the US and the US-China phase-deal signing in ceremony. Though, mixed trade/political news limit the oil benchmark’s upside.

The US and China signed the phase-one deal of their fresh trade relations on Wednesday. China agreed to cut its trade balance with Washington by $200 billion whereas the US dumped Beijing from the currency manipulator list were among the many clauses that were written. Following the signing in ceremony, the US Vice President Mike Pence said that the talks surrounding the phase-two deal have already begun.

Also increasing the market’s trade optimism were comments from the US Treasury Secretary who lauded the recent trade deals with China on one hand and Canada-Mexico on the other to add 50 to 70 basis points to the US GDP. Further, China’s Vice Premier’s optimism surrounding the economic growth also played its role to please the energy traders.

Earlier during the day, oil prices bounces off six-week low after the US Energy Information Administration (EIA) showed that commercial crude oil inventories in the US fell by 2.5 million barrels in the week ending January 10th, forecast for a drop of 474K barrels.

Even so, uncertainties surrounding US-China phase-two deal talks and receding odds of the US-Iran war keep the buyers under check. Political plays in and concerning Iran are likely pushing it farther from additional confrontation to the west whereas the Financial Times (FT) doubts about whether the US-China trade truce will stick.

Moving on, oil traders will keep eyes on the trade/political headlines for the fresh impulse while the US dollar (USD) performance will also offer direction to the commodity prices.

Technical Analysis

Buyers will look for entry beyond $59.00 while aiming for 38.2% Fibonacci retracement of the October-January rise, at $60.15. Meanwhile, sellers will target downside break of 200-day SMA level of $57.75 to aim for 61.8% of Fibonacci retracement, at $56.70.