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Oil sees little change in early-week trading, WTI shying away from $63.00

  • Oil prices are trading thinly in early Monday action following Friday’s downside pressure.
  • Broader oil markets remain constrained  by trade fears and impending oversupply.

Crude oil markets topped out with WTI reaching 75.00 per barrel only a month ago, but a crushing wave of crude production is threatening global oil markets’ two-year bullish extension. WTI barrels are currently testing the 62.60 region, playing to the downside in early trading after the US’ Friday announcement of Iran sanction oil-buying waivers.

Energy markets were keeping oil price propped up on expectations that impending US sanctions on Iran would see global supply constrained with one of the market’s largest players pushed onto the bench, but the US, Saudi Arabia, and Russia are all producing crude at a record pace, and broader oil prices are now facing a risk of getting flooded by untamed oversupply, along with a last-minute waiver system being offered by the US to allow allies to continue importing Iranian oil, lessening the blow of sanctions.

Along with a continuous stream of worrying economic data out of China, and broader demand for energies seeing threats, US crude oil sees a futures curve that has, up until now, forecast tightening expectations of tighter supply, and now forward-dated contracts are hinting that crude demand could be swept over by a tidal wave of supply in the months ahead.

According to Jim Ritterbusch, president of Ritterbusch & Associates, trade wars are also playing their part in deflating energies demand: “”The magnitude of recent selling is strongly suggesting that global oil demand is weaker than expected as a result of tariff issues, especially between the U.S. and China.”

WTI levels to watch

The current crude oil selloff may have overextended itself, with US crude prices declining for four straight weeks into the 62.50 region, and the next logical resistance zone for a bullish recovery will be seen at the previous support zone near 66.30, while continued selling will see fresh support from last April’s low of 61.75.

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