WTI Crude Oil Extends Winning Streak – Signs of Tightened Supply in Play

Posted Monday, June 22, 2020 by
Arslan Butt • 2 min read

During Monday’s early Asian trading session, WTI crude oil registered 3-day winning streak and took bids near $40.11 while representing 1.5% gains on the day mainly due to the signs of tighter supplies from primary producers, which initially boosted the investor sentiment. On the other hand, the fears of lower demand in the wake of coronavirus’s (COVID-19) fresh outbreak and trade/political tussle between the US and China became one of the major events that kept a lid on any further gains in the black gold. At this particular time, WTI crude oil prices are currently trading at 39.80 and consolidating in the range between 39.16 and 40.16.

At the data front, the weekly numbers of the Baker Hughes US Oil Rig Counts printed a record low of 189 from 199. Notably, these figures matched the drops established since late-March. The reason for the signs of tighter supplies could also be attributed to the agreeability to the output cut agreement by global oil producers, which also restricted the supply side. It should be noted that Iraq and Kazakhstan recently showed the agreeability on oil production cuts, while Norway sounds positive over the cartel’s impact on oil price recovery, which also added strength to the black gold prices.

However, the crude oil prices were further boosted by the gradual recovery in demand after easing of lockdown restrictions in significant economies earlier. But now, investors seem cautious as the latest cases of coronavirus are getting intense day by day, with Florida reporting an increase of 3.7% in cases against a previous 7-day average of 3.5%. Additionally, Texas, Oklahoma, and California also showed a sharp rise in cases which could diminish the oil demand once again.

At the US-china front, the Dragon Nation recently fueled the long-lasting tussle between the two countries by cancelling American meat import from Tyson in the wake of virus fears. Whereas, the US Secretary of State Mike Pompeo’s discussion with allies over global measures on China also exerted some downside pressure on the market trading sentiment, which turned out to be one of the key factors that kept a lid on any additional gains in crude oil prices. Apart from US-China, the geopolitical tensions between North Korea and South Korea as well as the terrorist attack in the United Kingdom also weighed on the market trading sentiment.

Australia recently decided to extend a state of emergency until July 20 due to a rise in the number of cases in Victoria state. As a result, the market’s risk barometers flashed red. While citing the same, S&P 500 Futures stayed sluggish around 3,050, representing a 0.25% decline.

At the USD front, the broad-based US dollar erased its overnight gains and dropped on the day even after the World Health Organization fueled the coronavirus second wave fears. However, the decline in the greenback kept the oil prices higher as the price of oil is inversely related to the US dollar price. Whereas, the US Dollar Index that tracks the greenback against a basket of other currencies slipped 0.06% to 97.523 by 11:23 PM ET (4:23 AM GMT).

Looking forward, traders will keep their eyes on the virus and Sino-American headlines. Lastly, the US Chicago Fed National Activity Index for May, prior -16.74, can offer additional details for decision making.


Daily Support and Resistance
S1 35.4
S2 37.47
S3 38.49
Pivot Point 39.54
R1 40.56
R2 41.61
R3 43.68

WTI is holding very close to a double top resistance level of 40.58. Below this, the sellers can keep the market sentiment bearish until 39.17 support level. Violation of this support can add more sales until 38.45 level. Overall the trading range is expected to be 40.58 – 39.17 level today.

Good luck!

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