Will Oil Prices Feel the Heat of the Impeachment Inquiry?

Today at 10:21 AM ET, WTI crude oil prices were up 1.6% to $60.18 per barrel. Since last Friday, WTI crude oil active futures have risen 1.5%. If they stay at this level for the remainder of the day, then we could see the second consecutive weekly rise for oil prices. Oil prices have surpassed $60 for the first time since September 17.

Trade deal

WTI crude oil active futures rose sharply in today’s trading after President Donald Trump tweeted to confirm that Phase 1 of the US-China trade deal had been achieved.

The president tweeted, “The Penalty Tariffs set for December 15th will not be charged.” He added that talks related to Phase 2 were in progress. The Trump administration isn’t rolling back the previous tariffs.

Today, CNBC reported that China would hold a press conference to provide an update on the progress of the trade talks. The new development around the trade deal is bullish for oil prices and the United States Oil ETF (USO).

Trump’s impeachment and oil prices

Today, CNBC also reported, “The House Judiciary Committee on Friday approved two articles of impeachment against President Donald Trump, sending them to the House floor for a final vote.”

The equity market could fall as a result of Trump’s impeachment inquiry. Bearish sentiments could also affect oil prices. However, trade talk developments may limit any fall.

To learn more about oil and the equity market, read Why Did the S&P 500 and Oil Diverge?

Oil rig count

This week, the oil rig count in the US is at 667, just four higher than its lowest level since March 31, 2017. In 2019 so far, the oil rig count has fallen by 25%. The fall in the count could stall the US oil production growth rate.

Both the IEA (International Energy Agency) and EIA (U.S. Energy Information Administration) expect a slowdown in US oil production. This expectation might be a bullish driver for oil prices amid OPEC+’s deeper cuts. To learn more, read On Oil Prices, OPEC Differs with IEA and EIA.

However, Trump mentioned in his tweet that there would be “massive purchases of Agricultural Product, Energy, and Manufactured Goods” in the first phase of the deal. US energy exports could help to narrow the US-China trade deficit.

If this is how the US and China are going to settle their dispute, then it could come as a big blow to Russia and Saudi Arabia. Russia and Saudi Arabia are the dominant players in the Chinese energy market, and the growth in China’s energy demand could be immense in the coming years. For example, by 2025, China could be the largest aviation market in the world. Currently, the US is the world’s largest aviation market.

Oil’s moving averages and price target

Yesterday, WTI crude oil prices settled 3.3%, 6.4%, 6.5%, and 3.5% above their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Technically, this is bullish for oil prices.

On Thursday, WTI crude oil’s implied volatility was 25.7%. Until next Friday, crude oil active futures could settle between $57.32 per barrel and $61.04 per barrel based on implied volatility.

To learn more about this price model, read Oil Prices: Implied Volatility Suggests Upside Is Intact.