{"id":84690,"date":"2024-05-30T15:29:00","date_gmt":"2024-05-30T12:29:00","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=84690"},"modified":"2025-12-30T12:05:05","modified_gmt":"2025-12-30T10:05:05","slug":"oil-outlook-remain-relatively-unchanged","status":"publish","type":"post","link":"https:\/\/www.ironfxcn.com\/en\/oil-outlook-remain-relatively-unchanged\/","title":{"rendered":"Oil Outlook: Remain relatively unchanged"},"content":{"rendered":"\n

There seemed to be relatively low volatility for oil prices since last week\u2019s report<\/a>. In the current report, we intend to have a look at the state of the US oil market, the role of the USD in determining oil prices and the possible implications of OPEC+\u2019s meeting  on Sunday. To conclude the report we will also provide a technical analysis of WTI\u2019s daily chart<\/p>\n\n\n\n

Uptick in demand from the US oil market<\/strong><\/strong><\/h2>\n\n\n\n

We start our analysis of the US oil market<\/strong> by having a look at the release of the Baker Hughes oil rig count. The release indicated that the number of active oil rigs<\/strong> in the US have remained steady which may imply that demand for oil has been maintained.  Furthermore, on Wednesday, the API weekly<\/strong> crude oil inventories<\/strong> figure, showcased a drawdown of -6.490 million barrels. The reversal from a pileup<\/strong> in inventories last week, to a drawdown in inventories, may imply that demand<\/strong> for oil from US consumers<\/strong> has increased<\/strong>. <\/p>\n\n\n\n

Hence, with the drawdown figure also vastly exceeding market expectations<\/strong>, it may have provided some support for oil prices. Thus, attention now turns to the release of the EIA weekly crude oil inventories<\/strong> figure later on today. The current market expectations are for the EIA figure to also indicate a withdrawal<\/strong> of  -1.600 million barrels, which would coincide with the API\u2019s uptick in oil demand since last week. Therefore, should the figure come in as expected or lower, it may provide support for oil prices. Whereas, should it come in lower than expected, it could weigh on oil prices.<\/p>\n\n\n\n

Fed\u2019s gauge for inflationary pressures, due out on Friday.<\/strong><\/h2>\n\n\n\n

Another issue we would like to address is the release of theUS Core PCE rate on Friday<\/strong>, which is the Fed\u2019s favourite tool for measuring inflationary pressures<\/strong>. The current expectations<\/strong> by analysts are for the Core PCE rates for April to remain steady at 2.8% on a year-on-year level<\/strong> and at 0.3% on a month-on-month basis<\/strong>, thus implying persistent inflationary pressures in the US Economy. <\/p>\n\n\n\n

As such should the rates<\/strong> come in as expected, or even higher which would imply an acceleration of inflation in the US economy<\/strong>, it could force the Fed\u2019s hand to maintain its current restrictive monetary policy stance for a prolonged period of time. The implications of the Fed maintaining interest rates higher for longer, could result in tighter financial conditions <\/strong>surrounding the US economy, which in turn could hamper oil demand. <\/p>\n\n\n\n

Therefore, the implications of tight financial conditions for longer, could also have an adverse impact on oil prices, as the possibility of a reduction<\/strong> in demand<\/strong> for oil , may weigh on oil prices. In conclusion, should the US Core PCE rates come in as expected, hence showcasing stubborn inflationary pressures, it could weigh on oil prices. On the flip side, should the release imply easing inflationary pressures<\/strong> in the US economy, it could provide support for oil prices.<\/p>\n\n\n\n

OPEC+ meeting on Sunday.<\/strong><\/h2>\n\n\n\n

We make a start with our OPEC comment<\/strong> by noting that the group of oil-producing economies is set to meet on June 2nd<\/sup>  which is this Sunday,<\/strong> via conference call. A rollover<\/strong> of the production cuts seems to be the predominant scenario currently, a view which we tend to agree with. We believe that the extension of the cartel\u2019s voluntary oil production cuts, may worsen the rifts that appear to be emerging within the members of the organization. In particular, the division between the UAE, Iraq, Kuwait, and Algeria who were scrutinized<\/strong> by the rest of the bloc<\/strong> for their oil production capacities. <\/p>\n\n\n\n

Therefore, we do not anticipate further oil production cuts, as a report by Bloomberg on the 14th<\/sup> of May quoted one of it\u2019s sources as saying that \u201cSome have pushed for an upward revision\u201d, when referring to oil production levels. Therefore, should the bloc maintain its current output commitments intact, it could weigh on oil prices. However, a surprise<\/strong> move<\/strong> by the cartel to increase their voluntary oil production cuts could significantly support oil prices.<\/p>\n\n\n\n

Technical Analysis<\/strong><\/h2>\n\n\n\n

WTI Cash Daily Chart<\/strong><\/strong><\/h3>\n\n\n\n
\"WTI<\/figure>\n\n\n\n