Oil Fundamental Forecast – May 31, 2016

Crude Oil dipped 19 cents to 49.14 ahead of the big OPEC meeting on Thursday. The rally in the US dollar is weighing on all commodities. Brent Oil dipped 33 cents to 49.62. US crude has hit its highest rate in the oil market. A climb above $50 per barrel could spur producers, particularly US shale drillers, to revive scrapped operations, which could bloat supplies and trigger a new selloff, analysts said. Around 1115 GMT, US benchmark West Texas Intermediate for delivery in July was down 61 cents to $48.98 a barrel. The crude oil futures had climbed 62 cents to $49.24 a barrel by 0249 GMT in USA market, after ending the previous session up 54 cents. However, the recent rise in oil prices and friction between key members Saudi Arabia and Iran mean a coordinated effort to intervene to support prices is slim. “The return of disrupted supply and OPEC’s increasing of production lay the foundation for a wider market surplus, and for prices to fall back below $40 in the short run”, UBS analyst Giovanni Staunovo said in a note. The dollar spiked after U.S. Federal Reserve Chair Janet Yellen said an interest rate hike was probably appropriate in coming months. Brent had climbed 31 cents to $50.05 a barrel by 0225 GMT, its highest since November 4. Crude oil imports fell 4.7 percent to 7.3 million barrels per day last week, the EIA said. US crude slipped by 23 cents, or 0.5 percent, to $49.25.

Deep out-of-the-money put options — options that would not be profitable until a substantial pullback in the price of oil — have shown a marked increase in implied volatility, a sign that producers are locking in prices close to levels for them to be profitable while speculators are protecting themselves from a potential correction.

US crude has nearly doubled from 12-year lows touched in February. Market sources say much of that rally was fueled by the perception of the improving fundamental picture, with falling US output and global supply outages helping to rebalance a market reeling from oversupply for nearly two years.

FxEmpire provides in-depth analysis for each asset we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports, which covers the current week and are published by Sunday before the new week begins. Daily we share any new events, forecasts or analysis that affect the current day. To achieve a full accurate understanding it is important that you study all of our data and analysis as a whole.

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Upcoming Economic Events that you should be monitoring:

Tuesday, May 31, 2016

Government Bond Auctions

Date Time       Country           Auction

May 30 11:10 Italy Holds bond auction

Jun 01 10:30 Denmark Holds bond auction

Jun 01 11:30 Germany Eur 4bn Apr 2021 Bobl

Jun 01 11:30 UK 1.5% 2021 Gilt

Jun 01 17:20 Sweden Announces details of bond auction on Jun 08

Jun 02 10:30 Spain Holds bond auction

Jun 02 11:03 Sweden Holds I/L bond auction

Jun 02 11:50 France Holds bond auction