WTI: Russian Government Tells Refineries to Cut Production by June
Unnamed sources told Reuters that the Russian government had told produces of crude oil to cut production to 9 million bpd.
Unnamed sources told Reuters that the Russian government had told produces of crude oil to cut production to 9 million bpd.
That equates to a reduction of around 5.5% of the current level. Late last month, Russia’s deputy prime minister Novak said that current crude oil production was at 9.5 million bpd. The news of production cuts was reported earlier this month by Novak. The deputy prime minister had said that the plan was to cut 471 thousand bpd from production.
The sources also said that the government had given precise targets to each company in an aim to reach its OPEC+ pledge. Earlier this year OPEC+ had come to a consensus on reducing global supply.
How much these cuts can affect the market price for crude oil will depend greatly on global economic activity. In particular, the countries to watch will be the US, China, and India. We’ll get more information on US economic activity during the week from Durable Goods Orders tomorrow, and GDP Growth on Thursday.
Up Coming Events
- Durable Goods – Expected 1.1%, Prior -6.1%
- GDP Growth QoQ – Expected 3.2%, Prior 4.9%
- PCE Price Index – Expected 2.5%, Prior 2.8%
On Friday we’ll also get PCE numbers, which is the main inflation statistic the Fed uses when determining monetary policy. Higher inflation numbers could prove to be a drag on crude oil demand.
A sufficient decrease in global economic activity could suffice to offset cuts in supply programmed by OPEC. For now, the initial impact on market prices seems to show a generalized anticipation of constant demand and decreasing supply.
Technical View
The chart below for WTI shows a clear bull trend in place. The market broke above the Ichimoku cloud, as well as an important support level (black line). After the clearing that support level the market retraced and has today reverted to a rally.
With today’s candle set to close in the green, we can expect the next most likely move as being higher. I see the next resistance area at $88.97 (blue line), which was set back in October 2023. That peak gave way to a drop of over $20, or 23.6%.
While a break below the support line would find support on the upside of the cloud (green area) at around $76.31-$77.25. However, looking at the weekly chart you’ll see that the current candle has hit the resistance of the upper side of the Ichimoku cloud.
We’ll have to wait for the rest of the week to see if the market can clear that hurdle. A close above the cloud would be one indication that the market may be about to enter a long-term bullish trend.
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