- Nervousness ahead of Tuesday’s WTI June expiry seeps in.
- WTI wipes out gains, turns negative below the $32 mark.
- Signs improved demand, output cuts to support ahead of API data.
WTI (June futures on Nymex) bulls have given way, as signs of nervousness creeps into European trading, as we heading into June contract expiry this Tuesday.
Investors remain wary, especially in light of the May contract expiry rout that knocked off the US oil into the negative territory for the first time in the history of oil trading.
The black gold stalled its five-day winning streak and turned negative over the last hour, now trading -0.50% at 31.45 levels. Markets are aware of the CFTC warned about the prices turning negative again into the expiry.
WTI rallied 8% on Monday and hit the highest level in two months at 33.32 amid signs of pick up in oil demand globally, as the coronavirus lockdowns ease and the economic activity restart.
Further, the compliance to the OPEC+ oil output cuts deal and voluntary output cuts proposed by key OPEC producers continue to offer support to the prices. Also, improved risk tone on hopes of the anti-virus vaccine helped the bullish momentum in the barrel of WTI.
John Kemp, Energy Analyst, noted: “Futures for Jun delivery were squeezed higher yesterday as the contract headed towards expiry at the highest level since becoming the front month, and with a relatively high 34 million barrels still set for delivery, with one trading session left before expiry.”
Meanwhile, adding to the market anxiety at the moment, Kemp added: “CME officials will almost certainly have contacted every broker and member carrying a significant number of positions for Jun to find out their intentions (close, roll, delivery) and to ensure those with no intention/capacity to go to delivery keep well away from expiry.”
With the expiry play in focus, it remains to be seen if the US weekly crude stocks data, due to be published by the American Petroleum Institute (API), is of any relevance.
WTI technical levels to watch
To the upside, the immediate resistance awaits at 32.74 (daily high), above which the 33 handle will be tested. Alternatively, the 5-DMA at 30.15 will be on the sellers’ radar en route Monday’s low of 29.53.
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