Crude Rises Further with OPEC’s Supply Cut Extension
By: Eddy Peng May 22, 2017
Crude Oil trades higher and gets back above $50/bbl for the week for the first time in five weeks. Crude has experienced an impressive run in the last two weeks after what appears to be a washout of regretting long positions, which the CoT report indicated was near record longs. Yesterday Oil climbed 2.33 percent to $50.411 per barrel, breaking to two key resistances, 60-day and 200-day moving average.
OPEC and other oil producers are on course to agree an extension of supply cuts at a meeting on Thursday, with Saudi Arabia saying most participants are on board with the plan to rein in a global supply glut. Saudi Arabia’s energy minister said on Sunday that the supply cuts extension by a further nine months until next March, and adding one or two small producers to the pact, should reduce oil inventories to their five-year average, a key gauge for OPEC to monitor the success of the initiative.
“Everybody I talked to… expressed support and enthusiasm to join in this direction, but of course it doesn’t preempt any creative suggestions that may come about,” Khalid al-Falih told a news conference in Riyadh.
“We believe that continuation with the same level of cuts, plus eventually adding one or two small producers, if they wish to join, will be more than adequate to bring the five-year balance to where they need to be by the end of the first quarter 2018.”
The Organization of the Petroleum Exporting Countries, Russia and other producers agreed last year to cut production by 1.8 million barrels per day (bpd) for six months starting from Jan 1. After the deal on supply cuts oil prices gained a lot, but high inventories and rising supply from producers not participating in this deal, such as the United State, have imposed restriction on its rally, pressing the case for extending the curbs.
Although inventories held at sea and in producer countries have dropped, they remain stubbornly high in consumer regions, particularly in Asia and the United State.
OPEC’s goal is to cut global oil inventories to the industry’s five-year average. However, preliminary April data indicated stocks would rise further, the IEA said. Crude stocks stood at a record 1.235 billion barrels.
Technically, broader outlook for crude prices remains in the upside followed the successful breakout, which indicates potential further rise and gets close to the upper channel to test resistance above. Crude is currently standing at relatively strong position as the Relative Strength Index (RSI) keeps rising.
Keep a close eye on oil prices moving in these two days. If it fails to break to the upper channel (79.9% retracement), reversal movement may occur and the bearish momentum gathers pace.
Chart 1: WTICOUSD Daily
Thank you for inquiry ACY.
Your application has been received, and we will arrange an account manager within 24 hours to contact you! We wish you have pleasant trading experience!
