Crude oil prices resumed the downside move after a brief pause and could threaten the psychological support of $60 should the selling pressure persist. Brent is attempting to cling to the $61 handle but considering the general risk-off tone in the global financial markets, bearish risks could overweight in the short term.
Risk appetite soured as a senior US administration official said Trump and China's Xi Jinping are ‘highly unlikely’ to meet before March 1 deadline. Meanwhile, White House economic advisor Larry Kudlow said there's a "pretty sizable distance to go" before the U.S. and China reach a sweeping trade agreement. Not surprisingly, hopes of striking a trade deal before March 1 started to abate quickly, with risk aversion hit the markets across the globe, including commodities.
Another source of concerns for oil traders is the slowing global growth. The European Commission cut its outlook for euro zone GDP growth yesterday. Moreover, the Commission also revised the average oil price outlook lower by 20% from estimates made in autumn.
Against this backdrop, Brent may lose the $60 level for the first time this month, once the price fails to stay above $61 in the short term. On the other hand, the downside pressure should be limited due to sanctions against Venezuela and Iran. By the way, the US Special Representative for Iran Brian Hook said this week that Iran’s oil customers should not expect new U.S. waivers in May. In the medium term, this factor may support the market.