Crude prices witnessed a massive up move during the trading session today. The commodity surged as much as 5 percent as investors continued to react to news that Russia and Saudi Arabia have met recently to discuss the downturn in global oil prices with further talks potentially on the forefront. Traders continued to digest comments from the Russian energy minister that Russia would continue to consult with Saudi Arabia on ways to help stabilize the global energy market. It is imperative to state that global oil prices have been down by more than 50 percent since OPEC decided to leave its production ceiling unchanged which was seen as a huge negative.
Another reason for the surge in crude prices was the sell off witnessed in the dollar on the back of the weak economic reports coming out of the US economy which has many traders and investors believe that the Federal Reserve might not hike interest rates in the near term which was seen as a huge negative for the dollar. The dollar shares an inverse relationship with crude prices and therefore a weaker dollar is seen as a huge positive for crude prices in the near term.
Investors also await the release of the American Petroleum Institute’s weekly inventory report after the close of the trading session for further indications on the supply demand balance in the US markets. It is imperative to state US crude inventories remain near its highest level at this time of the year in at least 80 years. Traders on the street believe that if crude prices are able to sustain above the $51 level, it could retest $55 in the near term which is being seen as a huge positive. Traders are looking at $43 as strong support level on the downside in the near term.