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.

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank A/S (Headquarters)
Philip Heymans Alle 15
2900
Hellerup
Denmark

International

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

This website can be accessed worldwide however the information on the website is related to Saxo Bank A/S and is not specific to any entity of Saxo Bank Group. All clients will directly engage with Saxo Bank A/S and all client agreements will be entered into with Saxo Bank A/S and thus governed by Danish Law.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.