WTI plummeted over 2% on Wednesday as the outlook for oil grows increasingly gloomy. Here are the principal factors impacting the price of oil:

  1. Focus has shifted from supply side to demand – Whilst OPEC cuts and sanctions on Venezuela and Iran drove oil prices higher earlier in the year, more recently the demand side of the equation is dominating. As concerns over a global downturn increase, fears over a drop in global demand for oil are growing. The US Energy Information Association (EIA) cutting its forecast for 2019 world oil demand feed into this narrative sending the price of oil lower.
  2. US – Sino trade dispute – with the ongoing trade dispute between the US and China, the words largest consumers of oil, showing no signs of a resolution. The impact of increased trade tensions on the two economies is becoming more evident, as economic data continues to surprise to the downside.
  3. Rising stockpiles – An unexpected rise in US stockpiles is keeping oil under pressure. US crude inventories for week ending 7th June, increased by 4.9 million barrels vs. expectations of a 481,000 barrel decrease, data showed on Tuesday. Investors are growing increasingly concerned over swelling stockpiles amid slowing a slowing outlook for demand.
  4. OPEC to continue output cuts? OPEC plus Russia have limited their production output since the start of the year, to support falling prices. Traders will turn their attention to the next OPEC meeting expected 25th June where they will discuss the continuation of the current cuts. Given volatile output from Iran and the increasingly uncertain economic outlook, the broad expectation is that OPEC will agree to keep the cuts in place. This would be supportive of oil prices potentially giving them a lift in the third quarter.

WTI Levels to watch:

Oil is down for the third straight session, trading below its 50, 100 and 200 sma. A clear bearish trend. Immediate support can be seen at $51.15, before $51.50 and the key $50 level. On the upside a break through $52.60 could open the door to $53.40.

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DISCLAIMER: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase of sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

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