Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Since we reached our target of $68.2, my position now is to wait and watch for a few trading sessions.
WTI is now very close to breaking the $70/bbl., a psychological barrier driven by demand optimism. What should we do?
The oil market is flooded with positive news indicating a fast-rising oil demand on a daily basis. Prices are pushed now to almost $70 levels for WTI. The last trading session saw prices rising on account of the EIA inventory report. The actual decline in inventories was at the level of ~5 million barrels as opposed the estimated ~ 2.4 million barrels.
Another positive signal is job data as US employers added 559,000 jobs in May, as hiring picked up with the unemployment rate falling to 5.8%.
Will WTI cross $70 in the next few trading sessions? It is quite likely although there will be pushbacks, especially from developing nations like India and China. If that happens, the chances of prices staying that high may diminish. In any case, even though the sentiments are bullish, there is a high chance of a short-term price fall.
The US dollar index has also softened by 0.5% in the last trading session, which also helped in boosting the oil prices.
As per forecasts by Goldman Sachs and other leading authorities, oil can soar by another 10% from the current levels in the next few months. Whether this path will be linear or zig-zagged is something to be seen. I expect some price pullbacks in the coming weeks – the Iran-US deal will provide a more attractive price point to enter the market.
In summary, oil prices continue the rally driven by rising demand and a weak dollar. Demand from India remains subdued, although it could become noteworthy when it starts picking up by the end of June 2021.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term; my opinion; levels for crude oil’s continuous futures contract): Since we reached our target of $68.2, my position now is to wait and watch for a few trading sessions.
Thank you.
Nishant Jain, MBA, CPSM
Oil Trading Strategist
