$80 Oil, despite current weakness?
My colleague Fawad Razaqzada recently noted that the Brent oil price has been testing upwards resistance for several days but concerns over demand have prevented the bulls from committing to the upside. In recent days the bulls have been given supply side reasons to support an upward move, with news that suggests a tighter oil market in the second half of the year. Could oil move back above $80?
“A closing break above $77.00 to $77.50 will lift oil process above the technically important 21-day exponential average, providing us with an objective short-term bullish signal. This could then give rise to technical buying towards $80.0 next,” Razaqzada wrote on May 23. (Technical Tuesday).
Oil price dynamics aren’t straightforward. The Brent crude oil price has slipped back to $76.3 at the time of writing, but this could easily flip back. Tighter oil supply argues for higher prices; weaker global demand might offset the price impact. If the US leads the world into a global recession, prompted by failure of debt ceiling talks, higher interest rates, or both, and this would undoubtedly offset restricted oil supply.
Saudi Arabia's energy minister Prince Abdulaziz bin Salman Al Saud, said short-sellers betting oil prices will fall should "watch out", signaling that OPEC+, the Organization of Petroleum Exporting Countries and allies including Russia, could consider further increase output cuts at a meeting on June 4. "Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don't have to show my cards I'm not a poker player... but I would just tell them watch out," he told the Qatar Economic Forum organized by Bloomberg.
Tightness in the oil market is becoming evident, according to data from the Energy Information Administration. US crude oil supplies, ex the Strategic Petroleum Reserve, fell 12.5 million to 455.2 million barrels in the week ending May 19, 3% below levels typically seen in mid-May. Gasoline supplies dropped by 2.1 million barrels, 8% below the five-year average for the week, and Distillate stocks declined 0.6 million barrels, 18% below seasonal levels.
Harry Altham, Energy Analyst for EMEA and Asia at StoneX, notes that this report raised eyebrows across the market. This commercial drawdown was the largest seen since November 2022, and the scale of the draw caused technical buying in crudes, before Brent climbed back down from intraday highs above $78.60, eventually settling above $78.00 for the first time in three weeks. Altham concludes: “The data add to a growing body of evidence of global inventory draws, which could cause trepidation ahead of the OPEC+ meeting in two weeks.”
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.
FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.
FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.
GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.
© FOREX.COM 2024