The Crude Chronicles – Episode 43

<h2>Risk Sentiment Recovers, Helping Oil Prices</h2>
<p>WTI prices have seen a week of much reduced volatility with the market trading a subdued $5 dollar range over the week. Despite the lack of volatility, the market is at least on course to end the week in the green currently as the broad rebound in risk sentiment has helped assuage selling pressure for now.</p>
<p>Risk assets, including oil, has been lower over the last week as a result of a shift in investor appetite attached to increasing reports concerning the potential for a second outbreak of COVID-19. Following the reopening of local economies in the US, some states have been reporting a renewed increase in infection rates. This echoes the situation in China where Beijing has been returned to quarantine following a fresh outbreak there. However, risk sentiment was able to recover this week due in part to fresh headlines around potential medications for the virus which are proving to be effective in treating patients and also as a result of speculation that Trump is due to announce a fresh injection of fiscal stimulus which could be as much as $1 trillion.</p>
<h2>OPEC Lowers Global Oil Demand Projections</h2>
<p>At the OPEC+ technical meeting this week, the discussions concluded without any recommendations for further cuts and was instead focused on improving compliance with current cuts. The 9.7 million barrel per days cuts saw 87% compliance in May among OPEC and a group of non-OPEC nations headed by Russia. The cuts have been effective in helping lift oil prices over recent weeks though there are concerns the impetus will prove short lived once the cuts expire in July. OPEC has also downgraded its global oil demand outlook once again. The cartel projects that while demand will start to recover following the crash in Q2, it will still be 6.4 million barrels per day lower than H2 last year. In total, OPEC sees global oil demand falling by 9.2 million barrels per day over the year following an 11.9 million barrel decline in H1.</p>
<h2>EIA Reports Further Inventories Rise</h2>
<p>The latest weekly update from the Energy Information Administration reflected this continued lack of demand with US wti inventories rising by 1.2 million barrels over the last week. With this latest increase, oil inventories continue to move higher into record levels. The gradual reopening of local eocnomies has yet to translate into a solid increase for US fuel though gasoline stores were seen lower last week offering some encouragement there.</p>
<h2>Technical Views</h2>
<p><strong>WTI (Bullish above $29.14)</strong></p>
<p>From a technical viewpoint. Over a rather listless week, oil prices remained supported by VWAP which keeps the near-term bias bullish for now with a break of the $41.35 level the primary objective for bulls. Key downside support is sitting at $29.14 with the monthly pivot just a fraction above creating good technical confluence for buyers.</p>
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