Crude Oil Price Talking Points
The price of oil rebounds from a new weekly low ($111.20) even as the Organization of Petroleum Exporting Countries (OPEC) plan to increase production, and current market conditions could keep crude prices afloat amid a larger-than-expected drop in U.S. inventories.
Crude oil price remains insensitive to OPEC production hike amid falling U.S. inventories
The price of oil is on course to rise for the second week in a row as it tries to retrace the decline from the May high ($119.98), and it looks like the upward adjustment in the timing of OPEC production won’t do much to drive down crude prices amid resilient energy demand.
New updates from the Energy Information Administration (EIA) show U.S. crude oil inventories contracting for three straight weeks, with inventories shrinking by 5.068 million in the week ending May 27, while projections call for a drop of 1.35 million.
Data suggests that oil consumption will remain robust in 2022, even if the latest OPEC report Monthly Oil Market Report (MOMR) warns that “Global oil demand is expected to average 100.3 mb/d, down 0.2 mb/d from previous month’s estimates.“, and it looks like the group will maintain a phased approach in tackling high energy prices because “JJuly production will be adjusted upwards by 0.648 mb/d.”
In turn, developments out of the United States could influence oil prices ahead of the next OPEC Ministerial meeting of 30 June aamid the continued decline in crude inventories, with a closer look at the EIA report showing weekly field production holding steady at 11,900,000 for the third week in a row.
That said, current market conditions could keep the price of oil afloat as signs limited supply are greeted with indications of robust demand, and crude may attempt to test the yearly high ($130.50) ahead of the next OPEC Ministerial meeting as it traces the decline from the May Top ($119.98).
Daily crude oil price chart
Source: Commercial view
- The price of oil appears to be on track to test the May Top ($119.98) following the failure of the closing attempt under the $112.80 (161.8% expansion) to $113.70 (78.6% expansion)with a break/closing above the $120.90 (100% extension) area bringing the annual maximum ($130.50) on the radar.
- Imminent developments in the Relative Strength Index (RSI) may show that bullish momentum is accelerating as it approaches overbought territory, with a move above 70 in the oscillator likely to be accompanied by rising oil prices similar to the behavior seen earlier This year.
- However, the lack of momentum to clear the May Top ($119.98) can bring the price of oil down $112.80 (161.8% expansion) to $113.70 (78.6% expansion)with the next area of interest around $108.10 (61.8% expansion).
— Written by David Song, Currency Strategist
Follow me on Twitter at @DavidJSong