- The price of a barrel of oil plummeted overnight from the $60 handle.
- Rising Middle East geopolitical risks and sharp reductions in Iranian export flow are one to watch though.
WTI is currently trading at 56.47, between a range of 56.17 and 56.56, falling from the 60 handle overnight despite the extended OPEC-led production cuts. As widely anticipated, OPEC agreed to extend the supply curtailment agreement by 9 months, but markets sold the fact after an initial spike higher. Instead, the vulnerable global economy and trade negotiations and we witnessed the same outcome as the last extension around in December 2018 when prices dropped significantly.
Meanwhile, lifting prices a touch after the close in New York, the API weekly energy inventories arrived as follows; Crude -5mln (exp. -3.0mln, prev. -7.55mln); Cushing +0.882mln (prev. -1.26mln); Gasoline -0.387mln (exp. -2.2mln, prev. -3.17mln) and Distillate -1.7mln (exp. -1.0mln, prev. +0.16mln). The EIA data are expected to show crude inventories fell by 3.7 million barrels last week.
Looking ahead, for oil markets, participants will be closely watching for compliance signals:
“Saudi Arabia, which has been cutting production deeply beyond its allowed output budget, has signaled that it will continue to pump less than its allowance in July. This should help the supply-side pump out a positive narrative, which we expect will offset the growing fears of waning demand. We expect the OPEC+ group of producer’s promise to stay the course with their production curtailment agreement until the end of the year, rising Middle East geopolitical risks and sharp reductions in Iranian export flows, along with lower US inventories, will all contribute to upside potential for crude,”
analysts at TD Securities explained.
WTI levels
From a technical standpoint, WTI has dropped and closed below the 38.2% Fibo of the daily swing lows and highs, taking out the 20, 50 and 200 Experiential Moving Averages. The weekly lows at 56.77 were taken out and bears can look to the 52 handle and the 14th Jan 50.41 lows ahead of the 26th November lows at 49.44.
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