Oil News: Venezuela Leadership Signals Cooperation, Production Outlook Stable

Light Crude Oil Futures Edge Higher Despite Venezuelan Uncertainty

Light crude oil futures are edging higher on Monday after recovering from early weakness. The overnight trade has been choppy as traders probed the downside, testing the short-term retracement zone at $56.86 to $56.38 before reaching an intraday low at $56.31.

At 11:53 GMT, Light Crude Oil Futures are trading $57.74, up $0.42 or +0.73%.

Ample Global Supplies Offset Venezuela Concerns

Reuters reported that the earlier weakness was attributed to sellers who bet that ample global supplies were enough to offset concerns about the impact on oil flows from the arrest and capture of Venezuelan President Nicolas Maduro over the weekend.

Adding to the volatility was U.S. President Trump’s statement that Washington would take control of the country and that the current embargo on Venezuelan oil would remain in place. Traders also noted that the country had plenty of oil and that any further disruption to Venezuela’s exports would have little immediate impact on prices.

Furthermore, Kazuhiko Fuji, from Japan’s Research Institute of Economy, Trade and Industry, said that U.S. strikes had not damaged the South American country’s oil industry. “Even if Venezuelan exports are temporarily disrupted, over 80% are destined for China, which has built up ample reserves,” Fuji noted.

Additionally, new leadership in Venezuela appears to be willing to collaborate with the U.S., indicating that oil could potentially be flowing freely out of Venezuela over the near-to-medium term.

Technical Outlook: Downtrend Intact, Key Resistance at $58.88

Despite the technical bounce from $56.31, the downtrend remains intact. A trade through the swing top at $58.88 will change the main trend to up. Gains are also being capped by the 50-day moving average, also at $58.88.

Taking out $58.88 is also the trigger point for an acceleration to the upside with the intermediate retracement zone at $60.30 to $61.59 the next major upside target.

Support Levels Hold as Market Absorbs Weekend Developments

Today’s early support was provided by a short-term retracement zone at $56.86 to $56.38. Although the bottom was pierced briefly, the follow-through selling was weak and the market reversed to the upside. Taking out the intraday low at $56.31 later in the session could lead to an even steeper decline with $54.84 a potential target.

Market Outlook: Traders Watch for Supply Disruption Signals

Looking ahead, the early price action and the limited volatility as well as the positive response to the test of $56.86 to $56.38 suggest the market has fully absorbed the events from this weekend. Traders are now awaiting signs of increased oil flow. Any chance of a rally would have to be tied to a prolonged supply disruption.

More Information in our Economic Calendar.