Oil – OPEC+ meeting next week, demand is strong but there is fragility

Via ANZ, a good overview of oil heading into the OPEC+ meeting July 1:

  • group … reviews its production agreement
  • Increased travel and strong economic growth is likely to see the recovery in demand accelerate. This will tighten the oil market. 
  • However, the situation is fragile amid sudden outbreaks of COVID and the possibility of rising supply from a variety of sources. 
  • The market is calling out for more crude oil, while others are concerned about the inflationary impact of higher prices. 

Oil at $100?

Growing voices for higher oil

Some reasons for oil to remain bullish as follows. Eamonn has been well on this all week.
  • India sales have rebounded in 1h of June
  • US/Iran deal not progressing well
  • COVID-19 vaccines are going well – less of a link between infections and hospitalisations/deaths
  • Lack of supply noted
  • Inventories keep falling – another private inventory last night
  • Market shrugs off OPEC+ sources looking to increase supply from August
Reasonable to expect intraday buyers at $71.50 with stops below support

Growing voices for higher oil

ICYMI- BoA looking for oil to spike to $100

Analysts at the bank looking for Brent to US$100/bbl this year, and into 2022.

Doing a bit of a catch-up on this, BoA research note from Monday Asia time.

BofA citing:
  • tighter oil supply
  • demand higher
  • “We believe that the robust global oil demand recovery will outpace supply growth over the next 18 months, further draining inventories and setting the stage for higher oil prices”
Forecasts (average price over the year)
  • Brent crude $68 per barrel this year (from $63)
  • In 2022 to average $75 (vs. $60 earlier)
  • U.S. shale will likely respond …. ramping up production and Brent $65 per barrel by 2023
Analysts at the bank looking for Brent to US$100/bbl this year, and into 2022.

Oil boosted on expected drag on Iranian supply

Tricky negotiations

Oil is supported on demand recovery and low inventories. The sixth round of talks to restore the nuclear deal that would lift US sanctions still sees significant disagreement. If a deal is done, then expect oil weakness in the near term, However, for now, failed talks should help the oil complex stay supported despite the wider commodity rout on a hawkish Fed shift.

Tricky negotiations

Saudi oil minister says the cautious approach is paying off

Oil near the highs of the day

Saudi Arabia’s oil minister isn’t hinting at any change in strategy with oil prices well above $70/barrel. He said the market is ‘not out of the woods yet’.
WTI just touched a session high of $72.96.

Crude oil comes off highest level since October 2018

high price reached $71.24

The price of crude oil futures extended to a cycle high of $71.24. That is the highest level since October 2018. The current price trades around $71.

High price reached $71.24_

The price of crude oil is up for the 3rd week in a row. The price closed around $69.40. This week, the price traded above the $70 level, but also saw moves above and below that key barometer during the week.  So there has been some apprehension/anxiety.
That anxiety was shown yesterday,when the price fell sharply after reports that the US was easing sanctions on an Iran individuals. The US state department later said that the action was not reflective of overall easing of Iran sanctions but a normal review of past sanctions. As a result, the price moved back higher.
From a technical perspective, the fall yesterday stalled near the 200 hour MA (green line on the hourly chart above).  Not crashing below was a bullish clue. Today, the corrective low stalled at the 100 hour MA (blue line) before moving higher, also a bullish clue.
Ultimately, it would take a move below the rising 100 hour MA at $69.80 and the 200 hour MA at $69.23 to hurt the bullish bias. Until then, the upside might have some anxious moments, but the buyers would remain in control.

Oil sits lower on the day after first test of $70 falls short

WTI down by 0.9% to $68.60 currently

WTI D1 08-06

The $70 level is a key psychological resistance and that is keeping a lid on the latest bullish in oil over the past two to three weeks.
Price is backing away from the figure level to $68.60 currently but it surely will not be the last time oil runs up against said resistance level over the next few months.
The upside run looks to be running into some profit-taking but in the big picture, it is tough to handicap oil market sentiment at the moment.
The Iran issue is still a wildcard but with OPEC+ playing their cards right and the virus situation improving globally across major economies, the outlook is still solid.
There are a lot of punters pinning oil for a move to $100 in the year ahead and given how things are shaping up at the moment, it isn’t too far-fetched to be honest.
Sure, there will be risk factors evolving along the way but as things stand, the fundamentals are still working in favour of oil bulls at the moment and there’s no reason to turn the other cheek just yet.
Watch out for a test of $68 as that might attract some dip buyers before the next swing region closer to the $67 level.