It’s been a rough day last Wednesday for the crude oil market as a couple of bearish news weighed on prices. The first catalyst came with the Kazakhstan Energy Minister saying that National interests take priority over OPEC+ interests on output levels. That weighed on the market on higher supply expectations.
Later in the day, we got the news that several OPEC+ members wanted the group to approve another accelerated oil output increase for June at the meeting on May 5. It’s been baffling to see OPEC+ accelerating production hikes amid slowing growth due to the trade wars.
Several factors have been cited for such decisions and among them the most plausible ones cited by CNBC are that the group is bullish on oil demand later in the year and a desire by the OPEC leadership to send a warning signal to Kazakhstan,
Iraq, and even Russia about the cost of continued overproduction.
In the bigger picture, I think the trade negotiations are what really matters for the market and that’s likely what has been keeping the downside limited.
On the daily chart, we can see that crude oil is consolidating around the key 62.00-64.00 resistance zone. This is where the sellers are piling in with a defined risk above the resistance to position for a drop into new lows. The buyers, on the other hand, will want to see the price breaking higher to extend the rally into the major trendline around the 68.00 handle.
On the 1 hour chart, we can see that we have a minor support around the 61.75 level. If the price gets there, we can expect the buyers to step in with a defined risk below the level to position for a rally into the 68.00 handle. The sellers, on the other hand, will look for a break lower to increase the bearish bets into the 59.00 handle next.
This article was written by Giuseppe Dellamotta at www.forexlive.com.
