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  • Markets losing conviction from the $40 handle, bears step in to take control back.
  • Technical barriers and fundamentals tie-up for the bearish case.

WTI is currently trading at $37.87, offered on the day by 0.9% having fallen from a high of $38.83 to a low of $37.10 as the $40 handle made for too much technical resistance.

Fundamentally, it could be argued that prospects of output increases have been pressuring prices this week as well with the prospects for increased US shale output. 

A major concern is the resumption of production growth in the US shale patch, as prices sharply recover closer towards break-even levels,

analysts at TD Securities explained

There are also worries about compliance with a newly-extended OPEC+ pact to cut production by nearly 10 million barrels.

  • Saudis make biggest oil price hike in 20 years after OPEC+ cuts – Bloomberg

OPEC+, reached an agreement over the weekend to extend a global production cut of 9.7 million barrels per day by one month, through July, but the market doesn’t believe that it is enough.

This sentiment has been underpinned in markets when considering that the Gulf producers, Saudi Arabia, Kuwait and the United Arab Emirate, are not intending to extend the cuts of 1.18 million barrels per day that they are currently making on top of that OPEC+ target, tempering optimism for the ongoing Great Rebalancing.

Meanwhile, on the other side to this, analysts at TD Securities explained that signals had emerged that Iraq may be attempting to comply with the agreement, which is a “welcome sign”. 

“Most importantly for the rebalancing narrative, however, will be a resurgence in refinery runs which remain particularly low in the US, fueling fears that demand normalization is still lagging supply.”

WTI levels

  • WTI Price Analysis: Bears looking to failure below 200-DMA

 

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