Mixed EIA Report
WTI prices were seen extending their recent rally this week as global investor appetite continued to improve despite the ongoing unrest in the US. Oil prices have seen steady buying over recent weeks as global stay-at-home measures have continued to be reduced. With many economies making firm tracks towards full reopening, the increase in demand from both businesses and consumers has helped support oil prices.
However, the latest weekly update from the EIA highlighted issues. While the headline WTI inventories figure was lower, both gasoline and distillate stockpiles were seen higher with demand for both having also receded. This marks a break in the recent trend of recovery fuel demand and has concerned some about the pace of the recovery.
Confusion Around OPEC
Attention has also been on OPEC this week over speculation that the group’s next meeting could be brought forward and held as early as this week. OPEC and a group of non-OPEC producers agreed in March to increase production cuts to 9.7 million barrels per day, to be extending through June. These new cuts account for around 10% of the pre-virus oil market and have been successful in helping address the imbalance in the market. However, Russia is reportedly aiming to begin moving away from these restrictions in July while OPEC aims to agree an extension to these cuts to help drive the recovery rally further. So far, reports suggest that a one-month extension has been agreed between Saudi Arabia and Russia and was due to be confirmed at a meeting on Thursday. However, this meeting looks unlikely to be happening now and oil traders have been left dealing with some confusion and disappointment this week which has slowed the rally.
Economic Recovery Supportive
Despite the confusion, oil prices remain bid this week. The ongoing global recovery is keeping investor sentiment positive. The latest survey data reflected firm recovery in the Chinese services sector last month. The second largest consumer of oil has seen a strong pickup in data sets since the lockdown ended there and globally, manufacturing data has been continuing to rebound further increasing optimism. However, there are still risk in the outlook, as highlighted by central bankers and traders will be cautious as oil continued to advance here.
WTI (Bullish above $ 29.14)
From a technical viewpoint. WTI prices continue to rally above the $ 29.14 level this week and have now traded back above VWAP for the first time since January. While the $ 29.14 level remains in place, the bullish bias remains with $ 41.35 the next upside objective for bulls.
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