Oil market: too early to call a victory

OANDA:BCOUSD   Brent Crude Oil
Brent crude reached fresh one-month high around $62.50 late last week but failed to preserve the momentum and attracted profit-taking that took prices below the key $60 handle. At the start of a new trading week, the barrel was hit by dismal Chinese trade data that reignited concerns over the slowing global growth and pushed commodities lower.

Now, when global investors shrugged off another portion of bearish news, crude oil prices are trying to regain the upside bias but the traders prefer to trade cautiously so far. Oil market is getting more and more sensitive to global sentiment in the stock markets and demand concerns continue to cap the recovery potential in Brent.

Meanwhile, OPEC countries are trying to support the prices by positive comments. Today, Saudi Arabian Energy Minister Al-Falih said that it will take time for the production cuts to be reflected in the market but at the same time he highlighted that the OPEC+ 1.2 million bpd cuts will have a 'strong impact' on the market. A day earlier, the minister noted that the global economy is strong and there is no cause for worry.

However, it seems that such verbal interventions are not enough to fuel a sustainable rally in prices as there are still concerns over the global growth and rising activity in the US shale fields. Traders need to see evidence of the OPEC+ deal efficiency to start buying in a more robust manner. So, while the general sentiment in the market has improved in January, the doenside risks are still there.