Oil commentary [24/05/17]

Crude recovered from its early losses overnight with both Brent and WTI finishing roughly unchanged as both contracts head into a pre-OPEC meeting holding pattern. President Trump’s proposal to sell half of the United States’ Strategic Petroleum Reserve had only a transitory effect, with guidance from various OPEC Ministers pointing to the likelihood of a six, and possibly nine-month extension, to the production cut arrangement.

As we head into tomorrow’s meeting, it does feel as if this has been priced into the both contracts for now raising the possibility of some profit taking once OPEC announces its decision. Attention will then turn to the rather forgotten U.S. Crude Inventory numbers out very late in the New York session.

Brent spot has opened at the top of its recent range in Asia at 54.15 but faces initial resistance just above, at 54.30 followed by 55.50. It is comfortably above its 100-day moving average and first support at 53.40 followed by 52.50.

WTI spot trades at 51.25 near its overnight highs and initial resistance at 51.45. It is followed by the rather more formidable 52.00 level. More importantly, WTI has finally closed above its 100-day moving average and first support at 50.75 with the next support below this at 50.00.

As we approach Thursday’s main event, we expect nerves to increase amongst oil traders making both contracts increasing vulnerable to short-term headline driven moves.