Oil prices remain supported

WTI’s price was on the rise in the previous days after having a challenging past week mostly moving to the downside. At the moment the Oil market is affected by various fundamentals at the same time and this report aims to identify and overview some of the most important ones that could act as price movers in the following days. Traders will also be provided with a technical analysis of WTI identifying important trends and levels.

We start first with the weekly economic releases related to the Oil market as they can prove useful in making further trading decisions. They can also help us clarify whether the weekly readings justify the recent price action of the commodity. On the 21st of May Friday the Baker Hughes weekly Oil rig count figure indicated active Oil rigs increased by 4 reaching altogether 356. An increase in Oil rigs is usually an indication of uplifted demand and could motivate Oil traders to push prices higher. A rather encouraging and interesting statistic by Baker Hughes is the fact that the active Oil rigs have increase by 119 compared to the same time last year. On the 25th of May the American Petroleum Institute reported its weekly inventory levels of WTI, indicating a minor drawdown of -0.4M barrels even though a larger drawdown was expected. On the 26th of May the EIA took its turn to release its weekly data indicating a drawdown of -1.66M barrels which was bigger than expected and bigger than the previous drawdown released. Overall the EIA and the Baker Hughes readings tend to support Oil prices while regarding the API the figure is rather neutral. Even though the overall picture of the indicators tends to justify the upward movement for WTI, the substantial move higher for the commodity was on the 21st and the 24th of May.

On a separate note, analysts are considering the entrance of Iranian Oil in the market as a threat to the current circumstances possibly destabilizing supply and demand. This could also be a headache for the OPEC plus group which meets on the 1st of June and as for the group’s plans for easing production cuts, second thoughts may prevail. Moreover, in the past days Russia’s Energy minister stated Global oil deficit at the moment is approximately 1 million barrels per day possibly cautioning the markets further steps as some uncertainty is still evident.

On the contrary the market seems to be supported by optimism that contradicts over supply fears. The US and Europe are going through a period of low virus cases with the immunity against the virus strengthening as vaccination is carried out systematically. This can help a lot in the following months with the summer kicking in, as tourism is possibly to pick up which could signal more fuel in general. In Asia and specifically India the circumstances could have been better with lockdown measure still being imposed and possibly curbing demand for Oil at this stage. In our opinion however the situation could be improving faster than initially thought.

Finally we would like to emphasize how sensitive the Oil market is to different aspects of the industry but also to the economy. Traders should be able to receive a balance of fundamental and technicals, in order to make solid trading decisions.

تجزیه و تحلیل فنی

نماد چهار ساعته WTI

Since the 24th of May WTI is trading in a sideways motion between our (R1) 66.70 resistance and our (S1) 65.40 support. The (S1) has been tested various times until this moment but is still holding up. On the other hand the (R1) 66.70 has not been clearly overpassed since March making it a rather interesting line for both the sellers and buyers. If the price action is to move higher, then the (R2) 67.70 resistance could come into play first while a strong bullish market can even send the commodity to the (R3) 69.40 level. If the selling orders are to flood the market then a move below the (S1) can force WTI lower to the (S2) 64.35 initially and then possibly make its way even lower to the (S3) 63.45 level. Our final support is the (S4) 61.90 line which is the lowest price for WTI so far in May. On a wider view we can see a sideways movement between the (R1) 66.70 and the (S4) 61.90 support. The RSI indicator below our chart remains above the 50 level for the time being. Yet according to its recent movement a gradual downslope has formed since reaching 70 very briefly.

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