Written by: Bryen Deutsch
Last week both WTI crude and ICE Brent crude traded within the previous week’s range. This inside week was choppy and fairly uneventful as a second consecutive inventory draw reported by the
EIA failed to drive the market to new highs. The chop fest continued Monday as the market closed slightly lower and will likely continue to be quiet Tuesday as it will be last trading day for May WTI. This overall lack of enthusiasm and sluggishness makes one think that the bulls better get their act together quick or their 2 month party to the upside party over. However, the bears will need to apply the pressure to force the bulls’ hands as they appear comfortably long.
Breaking news on Monday from oil producing nations failed to inspire significant price action. The fall of Ramadi in Iraq to ISIS encouraged some buying overnight Sunday. However, comments from Iran’s oil minister early in the morning regarding no likely cut in production from OPEC caused the rally to quickly fall apart. OPEC meets June 5 to discuss output. With the rebound in prices and diminishing rate of US rig cuts, it is tough to think OPEC will cut. It was announced Monday that Saudi exports for March were the highest level in 12 years.
Where do we go from here? With May WTI expiration tomorrow and a lack of economic news, it will likely be Wednesday’s DOE numbers before we see an attempt to break out of the trading range. With Memorial Day approaching, if Wednesday’s report fails encourage some action, the market might be satisfied to play in this range until after OPEC meets in early June. Brent crude on the continuation chart has posted lows for the previous 3 weeks of $63.90, $64.23, and $64.25. WTI is seeing similar support at last week’s low of $59.09. A break below these levels would open the door to $55 for WTI and $60-$61 Brent. On the upside, a move thru last week’s high sets the stage for a retest of the yearly highs and perhaps the $65 handle on WTI and $70 for Brent.
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