Crude Rebounds to Resistance as Short-term Momentum Accelerates

Crude oil prices rebounded on Thursday after finding support levels.  Wednesday unexpected build in crude oil inventories and higher U.S. production weighed on prices.  Traders are now eyeing OPEC June 22, meeting where the cartel could end production cuts. Saudi Arabia wants to issue its state own oil company IPO and will need WTI prices to rise to $80 to make the IPO palatable. The Russian energy and finance ministries agreed with oil companies to start cutting the export duty on crude gradually, to bring it from the current 30% to zero over the next six years.

Technicals

Crude oil prices rebounded climbing back to resistance which is the former breakdown level near 66.  Additional resistance is seen near the 10-day moving average at 66.72. The 10-day moving average crossed below the 50-day moving average which shows that a short-term downtrend is now in place. Support is seen near the June lows at 64.22.  Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal in oversold territory. The current reading on the fast stochastic is 19, below the oversold trigger level of 20, which could foreshadow a correction.

The Russian energy and finance ministries agreed start cutting the export duty

The Russian energy and finance ministries agreed with oil companies to start cutting the export duty on crude gradually, to bring it from the current 30 percent to zero over the next six years. The duty will be cut by 5 percent annually over the period, as part of a wider tax reform that seeks to replace the export duties and mineral resources extraction taxes with a single tax based on the profits that oil companies in Russia make. Currently, the oil export duty is tied to oil prices, and calculations for May saw it 6 percent higher than in April.

The idea of phasing out the export duties is not new. Last year, Finance Minister Anton Siluanov said the end of the duty will come no earlier than 2022-2025. Now, the six-year phase-out plan will see it gone by 2023. This compares to earlier and much more ambitious plans to have it scrapped by 2020.Eurozone Q1 GDP growth Was in Line with Expectations

NEC Director Kudlow previewed the G-7 meeting

NEC Director Kudlow previewed the G-7 meeting endorsing fast U.S. growth, while noting that trade issues will be discussed, including bilateral meetings with Canadian and French leaders. He also expects shared security issues like N. Korea to be discussed. He attributed U.S. success to tax policy and regulatory rollback, along with trade advocacy by the president. Kudlow touted record small business confidence and low unemployment, which show that U.S. policies are working and he hopes that our economic partners join with us in embracing growth.

Kudlow said the Chinese-U.S. negotiations on trade will lower the trade deficit if they work, but there are no deals at the moment. He hopes that the trade gap with China would fall if Beijing lowers tariffs. He believes that Trump has been clear on reform on the basis of “reciprocity” and will do what is necessary to protect U.S. workers and businesses. Kudlow said the WTO has become “completely ineffectual,” as major countries won’t even abide by its decisions, nor will the U.S. as a multilateral organization won’t determine U.S. policy. He says we’re not engaged in a trade war and don’t blame Trump, who is the first leader to act on these inequities. Kudlow said that most countries agree with the U.S. stance on China, but the U.S. is the first to stand its ground.