WTI crude oil futures (June contract) rallied 6.8% to $25.78 a barrel yesterday, boosted by expectations of reduced oil supply. Saudi Arabia announced plans to cut oil production in June by an extra 1 million barrels a day to 7.5 million, the lowest level since 2002. Meanwhile, the U.S. Energy Information Administration lowered its 2020 domestic oil production forecast to an average 11.7 million barrels per day, down 0.5 million barrels a day from 2019.
Source: Trading Economics
On the other hand, the American Petroleum Institute estimated that U.S. crude oil inventories would increase by 7.58 million barrels in the week ending May 8, more than 4.15 million barrels expected, though still showing a moderating growth as shown on the chart above. The U.S. Energy Information Administration (EIA) will report official crude inventories later today (+4.32 million barrels expected).
From a technical point of view, WTI crude oil futures (June contract) maintains upside momentum as shown on the 1-hour chart. It keeps trading within a consolidation range after a recent rally. Nevertheless, it has already gone past the 61.8% Fibonacci retracement resistance level of the decline started on May 7. The level at $23.60 might be considered as the nearest support level, while the 1st and 2nd resistance are likely to be located at $26.75 and $28.20 respectively. Alternatively, a break below $23.60 would suggest that the next support at $22.60 may be threatened.
Source: TradingView, Gain Capital
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