WTI Crude Oil Futures (June Future)

Yesterday’s Settlement: 58.21, down -2.21 [-3.66%]

If you read yesterday’s report, you know our fear was that the JP Morgan report talking about the probability of OPEC+ accelerated supply hikes had some credence. Since Kazakhstan said they will not obey production compliance, we have shifted our bias to neutral. Our fear on the bull case has been that OPEC+ will respond to Kazakhstan by ramping production to punish them with price.

Yesterday, this fear was somewhat confirmed as Reuters reported that the Saudi’s may be pushing for an acceleration to output hikes at the meeting scheduled for May 5th.

The OPEC meeting is scheduled for Monday, and fake news heading into OPEC meetings is an epidemic. If the official OPEC plan differs from the bearish headlines we’ve seen, sharp whipsaw price action is possible.

Regardless, risk is still skewed to the downside with the Saudi’s taking on this attitude of punishment towards Kazakhstan.

(Detailed charts and a breakdown of yesterday’s EIA report are available on our online Research Portal)

Today, Crude Oil is down -0.76 [-1.31%] to 57.45

The selling in Crude Oil is still tied to OPEC expectations for Monday. Equities are looking like they’re breaking out to the upside, and large-scale liquidations of Gold longs out of China could be taken as a signal that a trade deal is more probable. Hopefully, positive risk sentiment returns and helps boost demand expectations for oil.

Technical Analysis:

WTI Crude Oil futures traded through and settled below support yesterday. A run back to the lows around 55.00 look probable.

Beware of violent price action around this OPEC meeting, sharp and sometimes false breakdowns/breakouts occur in minutes around these meetings when key decisions are made.

We remain neutral, but risk looks skewed to the downside. The last time the Saudis dealt with a non-conforming OPEC member (Russia) with supply hikes, they brought oil prices below 0.00. Not saying that they will do that this go around, but their resolve should not be tested.

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