WTI Crude Oil Futures Continues To Rebound On the Expectation of Extent of OPEC Oil Cut

WTI Crude Oil futures slumped from January to April due to the outbreak of COVID-19. In April, Crude Oil futures even plunged to the negative value ......

Energy 14

WTI Crude Oil futures slumped from January to April due to the outbreak of COVID-19. In April, Crude Oil futures even plunged to the negative value as the investors have to close their position to avoid the settlement of crude oil.

After that, Crude Oil futures rebounded around 90% from April's close price at $18.84 per barrel to May's close price at $35.44 per barrel due to the supply cut from OPEC+ and expectation of the economy reopening.

The U.S. Energy Information Administration (EIA) reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.1M barrels from the previous week to 532.3M barrels for week ended May 29. Besides, U.S. oil production decreased to 11.2M b/d from 11.4M b/d in the prior period. 

In the below chart, it showed that the increase of crude oil inventory peaked in April, which timing is similar to the bottom of Crude Oil futures prices. Currently, the stockpile data swung from negative to positive, then returned to negative again. Investors should focus on the next inventory data to show whether the trend of stockpile withdrawal starts.


Source: Trading Economic

Currently, the media reported that OPEC+ would set to extend the oil cuts after a breakthrough with Iraq, and the deal might be signed as soon as this weekend. Under the original agreement, OPEC+ agreed to cut the oil production with 9.7M b/d in May and June. And the group would ease its cuts to 7.7M b/d from July to December. The extent of the deepest oil cut would be good fundamental news for the reduction of supply

From a technical point of view, Crude Oil broke above the declining trend line from January, indicating the bullish reversal signal.


Source: GAIN Capital, TradingView

In fact,  golden cross between 20-day and 50-day moving averages has been identified, enhancing the bullish technical outlook.

The bullish readers could set the support level at $30.90 (the support base between May 19 to May 29), while the resistance levels would be located at $41.4 (the gap created on March 9) and $49 (the high at March 3).

More from Oil

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.