WTI Crude Oil Futures Continues To Rebound On the Expectation of Extent of OPEC Oil Cut
Medion Jim June 5, 2020 12:20 AM
WTI Crude Oil futures slumped from January to April due to the outbreak of COVID-19. In April, Crude Oil futures even plunged to the negative value ......
WTI Crude Oil futures slumped from January to April due to the outbreak of COVID-19. In April, Crude Oil futures even plunged to the negative value as the investors have to close their position to avoid the settlement of crude oil.
After that, Crude Oil futures rebounded around 90% from April's close price at $18.84 per barrel to May's close price at $35.44 per barrel due to the supply cut from OPEC+ and expectation of the economy reopening.
The U.S. Energy Information Administration (EIA) reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.1M barrels from the previous week to 532.3M barrels for week ended May 29. Besides, U.S. oil production decreased to 11.2M b/d from 11.4M b/d in the prior period.
In the below chart, it showed that the increase of crude oil inventory peaked in April, which timing is similar to the bottom of Crude Oil futures prices. Currently, the stockpile data swung from negative to positive, then returned to negative again. Investors should focus on the next inventory data to show whether the trend of stockpile withdrawal starts.
Source: Trading Economic
Currently, the media reported that OPEC+ would set to extend the oil cuts after a breakthrough with Iraq, and the deal might be signed as soon as this weekend. Under the original agreement, OPEC+ agreed to cut the oil production with 9.7M b/d in May and June. And the group would ease its cuts to 7.7M b/d from July to December. The extent of the deepest oil cut would be good fundamental news for the reduction of supply
From a technical point of view, Crude Oil broke above the declining trend line from January, indicating the bullish reversal signal.
Source: GAIN Capital, TradingView
In fact, golden cross between 20-day and 50-day moving averages has been identified, enhancing the bullish technical outlook.
The bullish readers could set the support level at $30.90 (the support base between May 19 to May 29), while the resistance levels would be located at $41.4 (the gap created on March 9) and $49 (the high at March 3).
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.