Recap: Oil prices rose as much as 2 percent on Tuesday after Saudi Arabia said some of its oil infrastructure was attacked by drones, just two days after Saudi oil tankers were damaged off the coast of the United Arab Emirates. July Brent continued to climb higher in late afternoon trading, tacking on $1.42, to trade at a session high of $71.64 a barrel, while June WTI reached a session high of $62.11, a gain of $1.11, or 1.7 percent by 10.27 EDT. Market participants are still trying to navigate trade U.S. – China trade talks, which have come to a stalemate, supply shortages due to U.S. sanctions against Iran and Venezuela and ongoing OPEC led production cuts. Range bound trading between $65.00 and $60.00 is likely to continue unless fresh fundamentals enter the market. June WTI finished the session at $61.78 a barrel, up 74 cents, or 1.21 percent, while Brent for July delivery settled at $71.24 a barrel, up $1.01, or 1.44 percent. June RBOB rose 0.7% to $1.977 a gallon, while June heating oil gained 1% to $2.059 a gallon.
Technical Analysis: In a show of strength, June WTI settled above $61.51, the 50-day moving average, while failing to hold above $61.92, the 10-day moving average. At this point in time, it looks like we will see continued sideways trading. Should we get a break below $59.00, we could see a slip toward the $55.00 level. Support is set at $59.50 and below that at $58.25. Resistance is set at $62.60 and above that at $63.35.
Fundamental News: OPEC said world demand for its oil would be higher than expected this year as supply growth from non-OPEC producers, including US shale producers slows. It cut its estimate of oil supply growth from outside OPEC in 2019 and said the rapid rise in production of US tight oil was moderating. OPEC kept its estimate of global growth in oil use in 2019 steady at 1.21 million bpd. OPEC’s total oil production fell by just 3,000 bpd to 30.031 million bpd.
Saudi Arabia’s main equities index fell 2% on Tuesday after the government announced that drones had attacked oil pumping stations in the Riyadh region. Saudi Arabia said explosive-laden drones struck oil pumping station on Tuesday in what it called an act of terrorism two days after Saudi oil tankers were sabotaged off the coast of the UAE. Saudi Arabia’s Energy Minister, Khalid al-Falih, said the attack on two oil pumping stations had not disrupted oil production or exports of crude and petroleum products. Pumping on the East-West pipeline was halted until the damage is evaluated.
US President, Donald Trump, defended his trade war with China as tensions escalated this week, saying it was a model for US negotiations with other countries. He said “when the time is right, we will make a deal with China.” On Monday, China ignored a warning from US President Donald Trump and moved to impose higher tariffs on a range of US goods including frozen vegetables and liquefied natural gas.
Russia’s Foreign Minister, Sergei Lavrov, told US Secretary of State, Mike Pompeo, that it was time for Russia and the US to put aside years of mistrust and find a way to work together constructively. US Secretary of State told Russia’s Foreign Minister that US President Donald Trump is committed to improving relations with Russia.
Saudi Aramco aims to increase its oil supply to Europe by 300,000 bpd within the next two years as it expands its trading operations there with an office opening this summer in London.
Russian oil supplies to Poland and Germany via the northern spur of the Druzhba pipeline in Belarus are still suspended.
IIR Energy reported that US oil refiners are expected to shut in about 607,000 bpd of capacity in the week ending May 17th, increasing the available refining capacity by 438,000 bpd from the previous week.
Early Market Call – as of 8:25 AM EDT
WTI – June $61.04, down 74 cents
RBOB – June $1.9693, down 77 points
HO – June $2.0544, down 47 points
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