Crude Rebounding

Crude prices are trading higher today with the futures market managing to recover ahead of a test of the YTD lows. Prior to the recovery, the market had been under fresh pressure linked to OPEC+ hiking oil output for a second straight month. Ongoing uncertainty around US trade policies has also been a headwind for the oil market which has fallen sharply from the April highs. Indeed, the rebound in crude this week is being linked to technical buying more than any shift in the macro backdrop.

US/China Headlines

Looking ahead this week, focus for crude traders will be on any incoming trade headlines as well as the May FOMC tomorrow. On trade, any positive signals from the US or China should help boost sentiment. However, unless we see any concrete developments (such as negotiations beginning or a reduction in some tariffs) sentiment is likely to weaken as uncertainty persists.

FOMC Expectations

On the Fed front, traders are expecting the bank to keep rates on hold while pushing back against near-term rate cut calls. If USD remains weak on the back of the FOMC this could help lift crude prices further. However, if the Fed dwells too much on trade war risks this could cap the rally in crude for now. Ultimately, the better scenario for crude bulls would be some dovish surprise from the Fed in its guidance and positive US/China trade headlines this week.

Technical Views

Crude

The sell off in crude has stalled for now into a second test of the 57.42 level. With strong bullish divergence in momentum studies, price is potentially carving out a double bottom here against the YTD lows, signalling room for a corrective rally higher. 63.82 and the bear channel highs/67.45 will ne be the two key resistance areas to watch if we move higher here.