The Crude Chronicles – Episode 42

<h2>Stifled Action Despite Important Developments</h2>
<p>It’s been an interesting week for oil albeit a somewhat frustrating once as despite some key developments we haven’t seen much market movement. OPEC+ agreed to extend the current production cuts by a further month at a special meeting held this week. The extension was well signalled and did little to drive any reactive movement in oil prices. The announcement was something of a double edge sword as despite the extension being announced, Saudi Arabia, which is the largest producer in the group and the de-facto leader noted that it will end the extra cuts it had been running alongside those agreed with OPEC+ nations. Furthermore, it seems that despite the extension being announced, the market is concerned that an extra month of cuts will not be enough to address the massive oversupply in the market.</p>
<p>Saudi Arabia also noted an increase in its oil prices this week. The kingdom announced that Saudi Aramco will be increasing the price of its oil by $6.10 per barrel, marking the largest increase in 20 years. The move is a further sign that Saudi Arabia intends to boost the oil market by acting to remove the discounts being offered when the price war with Russia began earlier in the year.</p>
<h2>EIA Reports Record Inventories Level</h2>
<p>There was further evidence of the massive oversupply in the crude market this week as the EIA gave its latest weekly update. The group noted that US oil inventory levels rose to their highest level on record last week. Inventory levels increased by 5.7 million barrels to 538.1 million barrels. The latest increase was attributed to a steep increase in import levels amidst a simultaneous drop in import levels. US oil inventories have been increasingly steadily this year due to the COVID-19 stay-at-home measures which have decimated demand. Even with these measures beginning to ease now, the rebound in activity and demand has been slow and suggests that the recovery will not be as quick as initially anticipated.</p>
<p>Risk sentiment has been a little subdued this week, also hindering any further upside in oil prices. Equities and commodities prices have been coming off with the Fed warning this week that the US economy is projected to contract by 6.5% this year as a result of the disruption caused by the virus.</p>
<h2>Technical Views</h2>
<p><strong>WTI (Bullish above $29.14)</strong></p>
<p>From a technical viewpoint. WTI prices remain in consolidation just ahead of the $41.35 level following the breakout above $29.14 last month. With VWAP supportive and price trading well above the monthly pivot at $29.14, the near-term view remains bullish. Should price retreat below the $29.14 mark, the monthly S1 at $23.40 is the next support zone to watch.</p>
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