Talking Points:
- The ONE Thing: The drop in price aligns with the shrinking premium seen on front month future’s contracts compared to later-dated contracts. Traders should keep an eye to see whether or not the recent blast of supply is sustained, and if not, whether the upside could continue in crude oil[1].
- Per BHI, U.S. total count drops to 1,046
- The technical picture warrants attention as a potential bullish reversal that would be confirmed above $71/bbl (spot at $68.25)
- Crude falls for the week ahead of key earnings from Exxon & Shell as well as Chinese Energy Data
Fundamental Forecast for <USOIL>: Neutral
Crude opened the first day of trading last week with a sharp drop below $68/bbl only to seemingly find price and buyer support near $67/bbl. While the outlook appeared concerning with trade war headlines dominating terminals, news broke that Saudi Arabia, who previously increased supply to reduce price pressure for oil product users may not pump so much after all.
The news that new Saudi and OPEC oil may not be flood the market helped to foster an apparent turnaround. WTI popped back above the 50-DMA on the news, which provides hope for the beleaguered Bulls. Another key development last week was the narrowed spread between front-month Brent and WTI, which had been near historic highs earlier this year with a compliant OPEC and a drill and pump-happy United States.
Another factor that crude oil has been susceptible to alongside other assets is risk sentiment. While risk sentiment (basically, emotions and outlooks of traders and investors) are very volatile, they are a key driver of
