Soft US retail sales data reignited concerns among investors and weakened risk appetite in the global financial markets. However, crude oil prices showed resilience and extended the rally towards fresh nearly three-month highs around the $65 psychological mark on Friday.
Brent seems to have encountered a local resistance at this level as lack of news from trade negotiations and further signs of weakness in the Chinese economy cap the optimism in the market. The January inflation data has disappointed as consumer price growth has slowed to 1.7% from 1.9% in the previous month.
In fact, short-term direction in the oil market hinges on the signals from Beijing. At the moment, lack of statements and comments makes investors nervous and worry about the potential escalation in the trade war. Positive news could lift Brent further but the rally is unlikely to be sustainable as some traders may opt to take profit at attractive levels.
Technically, the prices need to confirm a break above the $65 figure to register another upside breakthrough. Brent will likely register a daily and weekly closing below this level.