Confusion reigns in crude oil ahead of weekly EIA report

Commodities 5 minutes to read

Ole Hansen

Head of Commodity Strategy

Summary:  Current very tight market conditions are keeping the risk to oil prices skewed to the upside, but this is a market with many moving and opposing parts and the picture could change very quickly. The next impulse could come from the EIA petroleum status report at 14:30 GMT.


The turmoil hitting financial markets this month has so far had a limited impact on crude oil. Brent has traded within a two dollar range with support being established along the 50-day moving average line. Despite heightened geopolitical tensions in the Middle East and tight market conditions due to voluntary and involuntary production cuts the upside has been capped around $72/barrel.

Given the very tight market conditions currently being signalled through the steepening backwardation in Brent we maintain the view that the risk remains skewed towards higher prices. This may change if Saudi Arabia and its partners in the Opec+ JMMC group signal a willingness to increase production when they meet in Jeddah on May 19.
The fact the market has failed to break higher given the overwhelming price positive newsflow, and given the rising net-long in Brent crude, the risk of a fundamentals-defying correction cannot, however, be ruled out. For now the selling appetite remains muted as long the market stays above the 200-day moving average, currently at $69.1/b. 
Source: Saxo Bank

Struggling to gauge the eventual outcome of so many moving and opposing parts, the market has instead been trading from one headline to another. The next being the Weekly Petroleum Status Report from the EIA at 14:30 GMT (16:30 CET). The market is trading lower today following yesterday’s update from the American Petroleum Institute which showed a build in both crude oil and products.

Saxo Bank A/S - Representative Office
Boulevard Plaza - Tower 1
30th floor, office 3002
Dubai Downtown, Burj Khalifa area
Dubai
UAE

UAE

Trade responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.