Crude Oil: Weekly Preview & Recap
Rowan Crosby • 2 min read
Last week was a bit of a rollercoaster ride for the crude oil market. Friday, in particular, saw price fall significantly as the bull run appears to be over for the short-term at least.
The big news on Friday that led to the sell-off was due to reports that OPEC and Russia are considering increasing production to meet the shortfall in supply from Iran and Venezuela. The US made the decision to pull out of the Iran nuclear deal while the output from Venezuela has collapsed.
The reports suggested that the next OPEC meeting in June will be one that needs to be watched very closely as there are reports that production might increase from anywhere from 300,000 to 1 million barrels per day. And there is clearly a large discrepancy between the two.
OPEC has been busy reducing production in recent times, in a bid to stimulate the oil price. It has so far been an effective move as we saw prices rise from around $50 to the current $70 range.
At the same time on Friday we also saw a rise in the number of rigs operating in the US. Baker Hughes reported that there was a 15 rig increases taking the number of rigs to 859.
What to Watch
This week we will again be wanting to closely watch any developments on the supply side. Especially surrounding the OPEC developments. The next OPEC meeting will be on June 22, so we have a bit of water to go under the bridge until then.
However, there will be the usual focus on the weekly inventory levels from both the API and EIA. Last week, we saw a surprise build which started the ball rolling.
If we are to get another build this week, it will only add to the bearish momentum that we’re now seeing.
I’m starting to now change my bias to bearish. That’s also easy to say after oil just fell 3%. We’ve been in a bull run for a long period of time and we might have just put in our high water mark for the year.
A few months ago I suggested that $70 would be the highs for the year and I still believe that will be the case. Notwithstanding the fact that oil has already traded as high as $72. Support looks to be in place at 67.00-67.50 and I suspect that might be broken this week as the market sentiment is rapidly changing.