Oil recovers on global sentiment then shakes out on inventory surplus, WTI stuck to $68/barrel

• Oil rises  in global risk recovery, but crude second-guesses after surprise  US stock surplus.
• OPEC, Russia production increases could see crude oil falling further.

Crude oil is trading flat so far for Thursday, with WTI cycling around 68/barrel.

Oil began declining recently after news broke that Russia and OPEC leader Saudi Arabia are mulling over a production increase now that global supplies have begun to wind down to manageable levels. Russia and OPEC tightly constrained oil supplies by 1.8 million barrels per day in an effort to combat a supply glut flowing out of the US. With the global stock overhang dealt with, Russia and OPEC are now considering lifting oil production by a million barrels per day in an effort to bring down oil prices. The news had the intended effect, bringing crude lower as WTI fell from a multi-year high of 72.83.

Risk appetite in global markets swooned this week following news that Italy’s newly-elected coalition failed to form a government, bringing fears to the markets that Italy would undergo a fresh election, bringing along with it fears that Italy may resolve to leave the Eurozone. Fears ebbed on Wednesday and risk assets jumped higher, including oil. The climb was halted after American Petroleum Institute figures showed a surprise increase in US oil stocks of a million barrels, clamping down on oil’s risk recovery and keeping WTI near the 68.00 level.

WTI levels to watch

As noted by FXStreet’s Eren Sengezer, “WTI could encounter the first resistance at $68.70 (May 30 high) ahead of $70 (psychological level) and $71.35 (May 9 high). On the downside, the immediate support is located at $68 (psychological level) before $66.40 (May 30 low) and $65.80 (May 28 low).”