Oil Attempts To Gain More Momentum As Crude Inventories DecreaseOil tries to gain more upside momentum above $40 as crude inventories decline by 7.5 million barrels.
Oil Video 15.07.20.
The main reason for this decrease is a major drop in U.S. crude oil imports which averaged 5.6 million barrels per day (bpd), a decline of 1.8 million bpd compared to the levels seen in the previous week.
Gasoline inventories decreased by 3.1 million barrels while distillate fuel inventories decreased by 0.45 million barrels.
The U.S. domestic oil production remained flat at 11 million bpd. It is obvious that the U.S. domestic production has stabilized at current levels and will not decline unless WTI oil prices dive below the $40 level.
The report looks rather bullish for oil since oil inventories decreased more than analysts expected. At the same time, the main driver for the decrease is a decline in imports so some traders would prefer to see additional positive catalysts before betting on oil price upside from current levels.
Saudi Arabia’s Energy Minister Signals That OPEC+ Will Reduce Production Cuts
Not surprisingly, Saudi Arabia signaled that OPEC+ will transfer to a new phase of production cuts as the market situation has materially improved.
This move is widely expected and should not put pressure on the market. In addition, Saudi Arabia continues to put pressure on countries who previously failed to meet their quotas.
Thus, the transfer from production cuts of 9.6 million bpd to the new level of 7.6 million bpd will be gradual since laggards will have to make additional production cuts in August.
The key question is whether WTI oil has enough catalysts to get above the nearest resistance at $41.50 and continue the upside move.
On the one hand, the demand for oil is rebounding while inventories have finally started to fall.
On the other hand, the U.S. oil production has bottomed and is ready to increase if prices go up. In addition, new lockdowns pose a threat to current oil demand recovery, although markets believe that a vaccine will soon solve the problem.
In my opinion, WTI oil has decent chances to develop additional upside momentum from current levels but failure to do this in the upcoming trading sessions could lead to a sell-off.
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