We are back to square one. The same scenario and pattern are repeating over and over. Crude Oil prices are going nowhere anytime soon.
As we noted in our previous reports, especially the one last week, after the prices went green on the year again, some of the OPEC members noted that it’s too early to talk about extending December’s deal.
This was after the recovery, while a few weeks ago when crude oil prices were declining sharply, some OPEC and Non-OPEC members were talking about the importance of extending the production cut deal in order to stabilize the markets.
This is what everyone should follow from now on. Whenever the prices start to slide, expect some remarks by OPEC and/or Non-OPEC members about extending December’s deal for another six months.
In short, they will not let the prices to trade below this year’s lows. However, will they be able to push the prices higher above this year’s high? I doubt it
The global economy growth rate is still sluggish and fragile, despite the fact that the IMF upgraded its outlook a few days ago.
Oil Forming New Resistance Area
Brent Crude recent rally has peaked around 56.0, declining all the way back to 54.90’s earlier this morning.
At the same time, WTI rally has peaked around 53.50, but also retreated back to 52.30’s earlier this morning as well.
Traders need to keep an eye on those two levels in the coming days, as a break above those levels would clear the way for further gains, but likely to remain capped below 56.80 in Brent Crude and 54.0 in WTI Crude.
Crude Oil Inventories Ahead
During the US Session ahead, we will be watching the US Crude Oil inventories, which set to have a notable impact on the market.
However, traders need to understand how to read these figures before acting in the coming hours.
Yesterday, the API data came in less than expected, showing a deficit of -840K barrels last week compared to -1.4M barrels estimated.
The surprise came in from the Gasoline, which posted an increase of 1.374M while the estimates were to decline by -2.0. Such data has led both Brent and WTI to slide.
As for today, the Crude Oil inventories is expected to show a deficit of -1.0M barrels last week compared to -2.2M barrels the week before.
Any deficit less than expected, would lead to another leg lower in both Brent and WTI, while a deeper deficit (unlikely) would lead them to recover yesterday’s declines.
Don’t Ignore USD Weakness
Traders need to be aware of the US Dollar weakness, especially after yesterday’s notable breakdown. The US Dollar Index is now trading below its 100.0 barrier, which clears the way for further declines ahead.
From a technical point of view, any bounce for the US Dollar Index is likely to remain capped below the 100.0 technical barrier.
On the downside view, the first immediate support stands at 99.21, which is the low of this year, which should be watched very closely, as a breakthrough that support would clear the way for further declines ahead, probably below 99.0.
If so, Crude Oil might get a lift. Yet, I believe that Crude Oil is likely to remain within a tight range for a long time, at least until the next OPEC meeting.