Glimmers of cooperation between world powers helped bring additional bids to oil to start the week.
It remains to be seen if the positive news was enough of a catalyst to form a bottom in crude oil prices. However, oil rocketed around 4% higher on Monday producing the largest one day jump in price since June.
The question before traders now is whether this is a signal of a reversal in the brutal bearish downtrend thats been in play for the previous two months.
The news from the weekend signaling potential for a truce in the trade war between China and the US provided some lift to start the weeks trading. Layering on the good news were reports that Russia and Saudi Arabia are extending their cooperation pact dealing with oil production. While no new details emerged about what this extension means, speculation was rampant that it could lay the ground work for a production cut to be announced when OPEC meets in Vienna this week.
More bullish news came from Canada as suppliers there announced an intention to cut back on production. Alberta Premier Rachel Notley announced the Canadian province would seek to limit production in their province by about 325k barrels a day to mitigate fears of a looming glut in supply.
Adding a measure of uncertainty to the picture was the announcement by Qatar that they were leaving OPEC to focus on natural gas production. While Qatar only accounts for about 2% of OPEC supplies, a move like this could be taken as a hint of surging discord within the ranks of the cartel.
Looking ahead, oil markets could see an extenson of volatility on the back of such breathtaking developments.
This week there is an OPEC meeting and the standard menu of data reports regarding drilling and inventories in the United States. The precipitous fall in the price of oil has been shocking to many over the last two months, and any bearishness in the data, or if an agreement from OPEC fails to materialize, markets could be quick to resume their sprint lower.
Traders looking to capitalize on such volatility could look ahead to the inventory report on Wednesday, the drilling activity report from Baker Hughes on Friday and for comments from OPEC as an opportunity to place volatility based trades using binary options and spreads with the expectation of additional movement in price.
chart by Jason Pfaff in TradingView