Crude Consolidation Continues As Market Awaits OPEC Actions

  • May 22, 2019 AEST
  • Team Kalkine
Crude Consolidation Continues As Market Awaits OPEC Actions

Brent Crude oil prices are consolidating in the range from US$71.80 to US$73.60 from past three trading sessions amid the absence of significant events and wait-and-watch strategy adopted by the market participants ahead of OPEC meeting in June.

The OPEC is expected to take a decision over the production in the coming monthly meet, which in turn, is keeping the market in the speculation mode.

The prices went high previously amid middle east angst and the rising tension between Iran and the United States. The United States imposed a suspension on the export of Iranian oil and took off the waiver from the import of oil from Iran, which in turn, created a concern of supply shortage in the global market and supported the crude oil prices.

However, the recent short-term outlook from the United States Energy Information Administration (EIA) mentioned that the OPEC could inch up the production, which could partially offset the production loss from Iran. The EIA estimation raised optimism in the global market over the supply side. And, the market participants are now eyeing the decision of Organization of the Petroleum Exporting Countries (OPEC) to instigate actions in the market further.

OPEC has been consistently reducing the oil output in the global market to support the crude oil prices and the prices are now above US$70 a barrel, and most of the companies can operate profitably around the market estimation of US$60 a barrel. It is to be further noted that the oil-producing cartel is also channelizing the high crude oil prices in the global market to reduce their dependence on high crude price.

The above mentioned two factors are in favour of restoring the production to the normal level, which in turn, could mitigate the raised supply concern in the global market.

Apart from the OPEC actions, the market participants are also eyeing on the crude oil stockpiles in the United States; the steep decline in the inventory observed this month as compared to the rise of 9.9 million barrels is another factor which raised concerns in the global market and supported the prices. However, as per the EIA estimation, the counts of drilled but uncompleted rigs in the United States is picking up, which could further reduce the concern of the supply shortage.

In the recent stance, EIA turned bullish on the crude oil prices amid Iran oil loss. However, the EIA seems to be neglecting the effect of the U.S-China trade war, and the market participants should keep a hawk-eye over the counter to further estimate the complete picture of the future demand and supply oil dynamics in the market.

Crude oil on Charts:

Source: Thomson Reuters; Crude oil Daily Chart

On a daily chart, crude oil prices are moving in a long-term uptrend; the prices corrected from its recent top of US$75.66 by more than 23.6% before resuming the initial rally. The prices are trading above the 7 and 20-days exponential moving average, which is at 71.83 & 71.53 respectively. On the chart, a golden cross-over (Bullish signal) emerged over the crossing of 7-days EMA above 20-days EMA from below, marked with a green up arrow.


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