Oil corrects to pre-OPEC+ levels
Following a 2% drop on Wednesday, both benchmarks are at their lowest since late March, at levels before the unexpected OPEC+ output cut. Still, some gains from that move remain to be erased.
Equities markets, which frequently move in tandem with oil prices, retreated from multi-week highs, while the US dollar index has risen approximately 0.3% so far this week. The greenback is on track for the best week since the end of February. A strengthening dollar makes energy more costly for foreign currency holders.
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Even though the most recent data coming from the US Energy Information Administration (EIA) showed crude inventories declined by an unexpectedly large 4.6 million barrels, gasoline inventories rose unexpectedly due to weak demand. Despite Moscow’s pledge to reduce output, there are indications that oil loadings from Russia’s western harbors have reached a 2019 high this month.
Oil stocks are also posting Q1 results
On Friday, SLB, an oil drilling and hardware firm, will release its financial results for the first quarter. First-quarter earnings are expected to increase 76% to 60 cents a share, according to analysts. Wall Street anticipates a 24% increase in sales to $7.44 billion.
SLB will be doing so after Baker Hughes (BKR) surpassed Q1 expectations on Wednesday, and after firms painted an optimistic picture of the energy market at the end of 2022. Early Thursday morning, Baker Hughes stock and SLB declined.
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Futures for US crude oil fell 1.5% on Thursday near $78, deepening declines from Wednesday. Brent futures declined $1.13, or 1.4%, to $81.99 per barrel.
More room for correction?
The WTI extended its corrective decline on Wednesday and appears to be on track to close the post-OPEC+ gap observed at the start of the month. There should be initial support near the $76.00 per barrel mark from the bulls, which is the peak from March 31st.
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The daily chart is still under the 200-day average, indicating a possible downtrend. The bears certainly think so with a third consecutive daily decline.
In case the bulls prevail, they will aim to the 200-day average as their resistance at the $82 mark. The outlook, however, still remains bearish to correct the short-lived rally.
WTI 1D chart, source: tradingview.com, author’s analysis
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