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Crude Oil Price Skittled as Market Swallows OPEC+ Cuts. Is WTI Rangebound?

Crude Oil Price Skittled as Market Swallows OPEC+ Cuts. Is WTI Rangebound?

Daniel McCarthy, Strategist

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Crude Oil, OPEC+, WTI, US Dollar, Saudi Arabia, API, EIA, Bollinger Bands – Talking Points

  • Crude oil leapt on OPEC+ cuts with a volatility blowout
  • It soon retreated and has settled back inside the range
  • Inventory data appears to be holding centre stage for now. Will it lift WTI?

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The crude oil price digested the OPEC+ cut to production to start the week as the broader macroeconomic picture remerges as a focal point for the energy sector.

Crude raced to a 5-week peak on Monday after the weekend announcement by the oil cartel that they will reduce output again to bolster prices, after having made a similar move in early April.

Saudi Arabia Minister of Energy Abdulaziz bin Salman referred to the slash in output as a ‘Saudi lollipop’ due to his nation bearing the brunt of 1 million barrels less per day.

It seems that the price reaction does reflect a short-term sugar hit that was soon metabolised by the market. The WTI futures contract climbed off last week’s low of US$ 67.03 to trade as high as US$ 75.06 first thing Monday morning.

It has since dipped to US$ 70.13 before settling just under US$ 72.00 going into Wednesday’s trading session.

Overnight, American Petroleum Institute (API) data saw crude stockpiles drop by -1.7 million barrels for the week ended June 2nd. This was below forecasts of a 1.5-million-barrel addition and the prior week’s 5.2-million-barrel addition.

Later Wednesday, the Energy Information Administration (EIA), a division of the US Department of Energy (DOE), will release its change in inventories for last week. The market is looking for a 1.022-million-barrel addition after the previous week’s addition of 4.488 million barrels.

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WTI CRUDE OIL TECHNICAL ANALYSIS

On Thursday a Bullish Engulfing Candlestick formation was created and it was a precursor to a run higher.

As part of that price action, the WTI futures contract whip sawed either side of the 21-day simple moving average (SMA) based Bollinger Band. A break outside the band followed by a close back inside the band could be interpreted as an indication of a possible reversal.

The latest price action may suggest that the market might be in range trading mode for now.

Resistance might be offered at the previous peaks of 75.06, 76.92 and 79.18 ahead of a potential resistance cluster zone in the 82.50 – 83.50 area.

On the downside, support may lie at the breakpoints and prior lows of 70.13, 67.03, 66.82, 66.12, 64.36, 63.64 and 62.43.

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Chart created in TradingView

--- Written by Daniel McCarthy, Strategist for DailyFX.com

Please contact Daniel via @DanMcCarthyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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