Crude Oil Weekly Price Forecast – Crude Oil Continue to Reach Towards Gap

WTI Crude Oil

The West Texas Intermediate Crude Oil market has gone back and forth during the week, as we continue to see a lot of noise in general. That being said, the market is likely to continue seeing resistance just above as it is the beginning of the massive gap that continues to be one of the biggest technical areas on the chart. I think that we probably will eventually break out to the upside and then go looking towards the $41 level above which coincides with the 200 day EMA. I do not expect break above the $41 level.

WTI Oil Video 01.06.20

Brent

Brent markets of course went back and forth during the week, as we continue to see a lot of noise when it comes to the energy market. Quite frankly, this should not be a huge surprise considering that the market has to deal with when it comes to demand and of course questions as to whether or not some of the members of OPEC plus will continue to keep the production cuts and play. At this point, I think that we probably go looking towards the $40 level, and then possibly even break above there to go looking towards the $45 level.

All things being equal, we could pull back to the $30 initially, so with that it is possible that the buyers will come in based upon value at that point. If we did break down below the $30 level, then it means we get another leg lower. All things being equal, the market is likely to be positive though, it just simply because we need to fill that gap.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Press Gap

WTI Crude Oil

The West Texas Intermediate Crude Oil market initially fell during the trading session on Friday but turned around to show signs of strength again. The gap is sitting just above here and therefore it is likely that technical traders will trying to find a reason to push into this area. Filling the gap is a common trade, and clearly the fact that we continue to find buyers on dips suggests that we are going to eventually find the momentum necessary. The top of the gap is near $41, and I think that is about as far as this market can go.

Crude Oil Video 01.06.20

Brent

Brent looks similar, but it has not reached the exact bottom of the gap, so it may have a little bit more of a fight ahead of it. Ultimately though, I do think that the market will make a decision and try to take off to the upside. I like buying dips, lease for the short term and until we get some type of major change in attitude what I consider shorting. Going into the weekend, it looks like we are still trying to find plenty of buyers to finally push higher, but ultimately this is a lot of back and forth, simply waiting for the next catalyst to get things going. I do believe that the 50 day EMA comes into play in both of these markets, at least for dynamic support. Expect volatility, so keep your position size relatively small until we get some type of clarity in these markets.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Worsening US-China Relations Likely Source of Impending Volatility

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are edging lower on Friday with prices dragged down by weak U.S. fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in U.S.-China relations. Nonetheless, the markets remain on track for a hefty monthly gain.

At 11:55 GMT, July WTI crude oil is trading $32.85, down $0.86 or -2.55% and August Brent crude oil is at $35.28, down $0.75 or -2.08%.

Both futures contracts are also in a position to post their first weekly loss after four consecutive weeks of gains that leave them set for the biggest monthly gains in years thanks to production cuts and optimism over Chinese-led demand recovery, analysts said.

WTI is on track for a record monthly gain of 72% in May, with Brent set for a 35% increase that would represent its strongest monthly rise since March 1999, Reuters said.

There are headwinds, however, which is likely the reason behind this week’s abrupt halt of the current rally.

“The global reaction to China’s move to propose new security laws for Hong Kong continues to increase, while there’s a score of new COVID-19 cases in South Korea,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugend.

U.S. President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday. His announcement is likely to be the source of volatility later in the session.

Despite US-China Issues, There are Positives

Thursday’s data from the Energy Information Administration (EIA) showed that U.S. crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.

However, storage in Cushing, Oklahoma, the main delivery point in WTI, decreased by 3.4 million barrels, and refinery utilization also rose to 71% from 69%.

Additionally, producers have scaled back output at a record pace as plunging prices made operation uneconomical. OPEC and its oil-producing allies agreed to the steepest production cut in history during an extraordinary, multi-day meeting in April. Then, earlier in May, Saudi Arabia said that, beginning June 1, it would voluntarily cut an additional 1 million bpd, on top of its portion of the cuts agreed to by OPEC+. Kuwait and UAE were among the other cartel members that followed suit and said they would also exercise additional cuts.

Daily Forecast

The wild price swings seem to be behind us, but the market is still vulnerable to a steep retracement of the recent rally. Traders are now waiting for the next OPEC+ meeting to set the longer-term tone. However, over the short-run Trump’s announcement regarding China’s influence in Hong Kong is likely to set the tone. We’re looking for a near-term correction of the recent rally.

For a look at all of today’s economic events, check out our economic calendar.

Economic Data to Take a Back Seat with Trump’s News Conference the Main Event

Earlier in the Day:

It was a relatively busy day on the economic calendar this morning. The Japanese Yen and Aussie Dollar were in action early in the day.

Away from the economic calendar, the markets responded to Trump’s announcement on Thursday of plans to unveil measures against China at the news conference later today.

Fiscal stimulus from Brussels and the easing of lockdown measures across the EU and the U.S had provided support to riskier assets ahead of today’s open.

Looking at the latest coronavirus numbers,

On Thursday, the number of new coronavirus cases rose by 112,124 to 5,900,627. On Wednesday, the number of new cases had risen by 110,221. The daily increase was higher than both Wednesday’s rise and 106,139 new cases from the previous Thursday.

France, Germany, Italy, and Spain reported 5,612 new cases on Thursday, which was up from 1,892 new cases on Wednesday. On the previous Thursday, 1,976 new cases had been reported.

From the U.S, the total number of cases rose by 22,413 to 1,768,216 on Thursday. On Wednesday, the total number of cases had risen by 20,392. On Thursday 21st May, a total of 28,089 new cases had been reported.

The uptick on Thursday will need to be monitored in the coming days. With the easing of lockdown measures now in the 4th week, it would be in the coming days that a 2nd wave would become evident…

For the Japanese Yen

Inflation was in focus in the early part of the day, along with industrial production and retail sales figures.

In May, the Ku-area of Tokyo saw inflationary pressures return, with core consumer prices rising by 0.20% In April, consumer prices had fallen by 0.10%, year-on-year.

According to the Ministry of Internal Affairs and Communication.

  • Rising prices for clothes & footwear (+1.7%), furniture & household utensils (+1.7%), and culture & recreation (+1.2%) supported the rise.
  • There were also increases in prices for medical care (+0.8%) and housing (+0.7%).
  • Prices for Education (-8.9%) and fuel, light, & water charges (-1.9%) pinned back inflationary pressures, however.
  • There were also declines in prices for transport & communication (-0.1%) and miscellaneous (-0.8%).

In April, industrial production slumped by 9.1%, based on prelim numbers, following a 3.7% decline in March. Economists had forecast a 5.1% slide.

According to the Ministry of Economy, Trade, and Industry,

Industries that mainly contributed to the decrease were:

  • Motor vehicles, iron, steel & non-ferrous metals, and transport equipment (excl. motor vehicles).

Industries that mainly contributed to the increase were:

  • Production machinery.

Forecasts for May were not much better, with the forecast for industrial production revised from -1.4% to -4.1%. For June, however, forecasts are for production to rise by 3.9%.

Retail sales also disappointed in April, with lockdown and social distancing measures weighing.

According to the Ministry of Economy, Trade, and Industry, retail sales tumbled by 13.7% in April, year-on-year, following a 4.7% slide in March. Economists had forecasts an 11.50% decline.

The Japanese Yen moved from ¥107.701 to ¥107.608 upon release of the figures. At the time of writing, the Japanese Yen was down by 0.22% to ¥107.41 against the U.S Dollar.

For the Aussie Dollar

Private sector credit stalled in April, following a 1.10% increase in March.

According to figures released by RBA,

  • Business credit rose by 0.1%, following a 3.1% rise in March.
  • Personal credit slid by 3.0%, following a 1.4% decline in March.
  • Housing credit rose by 0.2%, which was down from a 0.3% rise in March.

The Aussie Dollar moved from $0.66312 to $0.66315 upon release of the figures. At the time of writing, the Aussie Dollar was up by 0.08% at $0.6642.

Elsewhere

At the time of writing, the Kiwi Dollar was down by 0.11% to $0.6203.

The Day Ahead:

For the EUR

It’s a busy day ahead on the economic calendar. Key stats include French and German retail sales figures for April and the Eurozone prelim inflation numbers for May.

Prelim inflation figures for France and Italy and 2nd estimate GDP numbers for France are also due out.

We will expect the numbers to have a muted impact on the EUR, however. The EU’s recovery plan and the continued easing of lockdown measures remain positives.

While COVID-19 news and updates remain EUR positive, the markets will need to monitor the number of new cases. On Thursday, there was an uptick. If an upward trend begins, this could question member state plans to ease lockdown measures further.

From the early part of the day, it was risk aversion that pinned back the EUR as the markets await Trump’s news conference later today.

At the time of writing, the EUR was up by 0.07% to $1.1085.

For the Pound

It’s yet another quiet day ahead on the economic calendar. There are no material stats due out to provide the Pound with direction.

Through the day, expect market risk sentiment and any Brexit chatter to be key drivers.

At the time of writing, the Pound was up by 0.01% to $1.2322.

Across the Pond

It’s another busy day ahead on the U.S economic calendar. Economic data includes April inflation and personal spending figures and May consumer sentiment and Chicago PMI numbers.

Expect the May figures to have the greatest influence, with the markets likely to brush aside April numbers.

Outside of the numbers, FED Chair Powell is scheduled to speak. Any commentary on the U.S economy and monetary policy will garner plenty of attention.

The main event of the day, however, is Trump’s news conference. What does the U.S President have in store for China?

The Dollar Spot Index was up by 0.02% to 98.407 at the time of writing.

For the Loonie

It’s also a busy day on the economic calendar. Key stats include 1st quarter GDP numbers and April’s RMPI.

Expect the GDP figures to have some influence, though the markets are expecting some quite dire numbers. Anything better than forecast should be Loonie positive…

Crude oil prices and market risk sentiment will be the key driver on the day, however.

At the time of writing, the Loonie was down by 0.10% to C$1.3777 against the U.S Dollar.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Press the Issue

West Texas Intermediate Oil

The West Texas Intermediate Crude Oil market has initially pulled back a bit during the trading session on Thursday, but then turned around to show signs of strength again as continuing optimism floods into the market. That being said, it is quite interesting considering that there is a gap above and it is likely that it will probably get filled given enough time. That does not mean that it will be easy, and I do think that once we get to the top of the gap, closer to the $41 level, there is the 200 day EMA coming into focus there as well, so I think that is about as far as that goes. To the downside, there is plenty of support at the $30 level and of course the 50 day EMA.

Crude Oil Video 29.05.20

Brent

Brent markets have also pulled back slightly but then showed signs of life again as the market continues to see a lot of support based upon the 50 day EMA. Ultimately, this is a market that I think continues to see a lot of noise, but it is choppy to say the least and therefore you have to be overly cautious. The $40 level above starts to begin of a major gap that extends to the $45 level, so it is likely that we could see a bit of interest in trying to fill that as well. To the downside, it is not until we break the $30 level that uncomfortable shorting. Granted, economies are opening but demand is going to be weak.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Weaker after API Reports Large Unexpected Inventories Build; EIA on Tap

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower on Thursday, shortly before the NYMEX regular session opening at 12:00 GMT and ahead of the U.S. Energy Information Administration (EIA) weekly inventories report at 15:00 GMT.

Prices are down for a second session on Thursday as a U.S. private industry report showed a steep and surprising build-up in crude stockpiles, putting a lid on hopes of a smooth demand recovery as the global economy begins to ease its way out of coronavirus-related lockdowns.

At 06:46 GMT, July WTI crude oil is trading $31.95, down $0.86 or -2.62% and August Brent crude oil is at $34.91, down $0.54 or -1.52%.

Russia’s Commitment is Questioned

On the demand front, traders are becoming a little worried about Russia’s commitment to deeper than agreed upon oil production cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+.

“As is often the case during a run-up to an OPEC+ meeting, the focus is squarely on Russia’s commitment and understandably so as historically they have been the laggard within the OPEC+, said Stephen Innes, chief global markets strategist at AxiCorp.

Two days ago Russian Energy Minister Alexander Novak met with domestic major oil companies to discuss the implementation of global oil production curbs and the possible extension of the current level of cuts beyond June, sources familiar with the plans told Reuters.

American Petroleum Institute Weekly Inventories Report

The API reported late Wednesday a large crude oil inventory build, of 8.731 million barrels for the week-ending May 22. Analysts were looking for an inventory draw of 2.50 million barrels.

The API also reported a build of 1.120 million barrels of gasoline for the week-ending May 22, compared to last week’s 651,000-barrel draw. This week’s draw compares to analyst expectations for a 33,000-barrel draw for the week.

Distillate inventories were up by 6.907 million barrels for the week, compared to last week’s 5.1 million-barrel build, while Cushing inventories saw a draw of 3.370 million barrels.

Daily Forecast

After nearly a one-month rally, crude oil traders are booking profits. Prices just got too high given the uncertain outlook for supply and demand beyond June. Although we don’t expect the markets to come anywhere close to their late April lows, we would not be surprised by a normal 50% to 61.8% correction of the rally.

Worries about whether Russia will go along with an OPEC+ extension of the output cuts is understandable since there is always apprehension ahead of and OPEC+ meeting.

The wildcard over the near-term will be U.S. inventories. Given the steep drop in the number of operating wells, traders are expecting today’s EIA report to show a 2.5 million-barrel decline. Prices could stabilize if the report hits or exceeds the mark. However, expect a steep break if the numbers are bearish.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – API Report Expected to Show 2.5M Barrel Draw

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading lower late Wednesday, shortly before the release of the American Petroleum Institute (API) weekly inventories report at 20:30 GMT.

Oil prices tumbled early in the session after U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong and as some traders doubted Russia’s commitment to deep production cuts.

Later in the session, U.S. Secretary of State Mike Pompeo said he had certified that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, a blow to its status as a major financial hub.

But those aren’t the concerns late in the session on Wednesday, traders want to see if the API numbers will show a third consecutive weekly draw.

At 20:02 GMT, July WTI crude oil futures are trading $32.90, down $1.45 or -4.22% and August Brent crude oil is at $35.54, down $1.20 or -3.27%.

Oil Prices Jumped after Last Week’s API Report

On May 19, the American Petroleum Institute (API) reported a large crude oil inventory draw of 4.8 million barrels for the week-ending May 15.

WTI was trading up in the afternoon on May 19 prior to the API’s data release, but the day had already seen a two-sided trade, then back to a gain as the demand picture turned a bit rosier than it has been over the past few weeks.

Oil production in the United States has now fallen from 13.1 million bpd to March 13 to 11.6 bpd for May 8, according to the Energy Information Administration – a drop of 1.5 million barrels.

The API also reported a draw of 651,000 barrels of gasoline for the week-ending May 15 and distillate inventories were up by 5.1 million barrels for the week, while Cushing inventories saw a draw of 5 million barrels.

Daily Forecast

Today’s API report is expected to show another drawdown of about 2.5 million barrels. A steady to better reading could launch crude oil higher into the late session close.

A bad report will sent prices lower. The upside momentum seems to be slowing so I anticipate any sell-off to lead to a substantial near-term correction.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Press Gap Above

WTI Crude Oil

The West Texas Intermediate Crude Oil market has been quiet and choppy during trading on Wednesday, as we await to see whether or not the inventory situation is changing. What is working against the crude oil market more than anything else is the fact that Russia’s already starting to talk about increasing production in June, while the Gulf States are talking about the other side of the equation. At this point, the market looks to be a little bit confused, but the gap above still needs filled and it certainly looks as if the buyers are going to try to make that happen. I believe the $30 level underneath should be somewhat supportive.

Crude Oil Video 28.05.20

Brent

Brent markets also look as if they are supported just below, in the form of the 50 day EMA. There is still a gap above here that needs filled as well, and as a result I think it is only a matter of time before the markets tried to push into that gap. The $40 level of course is a significant round number, so course there will be traders look at that as well. Ultimately, if we break above that level then it is time to fill the gap which extends all the way to the $45 level. On the other hand, the market breaks down below the 50 day EMA, then it is likely that we will break down towards the $30 level. At this point though, it looks like the buyers are very tenacious so one would have to think that it favors a bit of a grind to the upside still.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Russia Discusses Extending Output Cuts, Hedge Funds Accumulating WTI

Nearly a month into its OPEC-led production cuts, Russian officials are already considering a possible extension of the current level of cuts beyond June. Meanwhile, there is evidence that the current rally isn’t being driven by only short-covering. New data indicates hedge funds continued to accumulate bullish positions in WTI crude oil.

Russian Minister, Oil Majors Discuss Output Cut Extension:  Sources

Russian Energy Minister Alexander Novak met with domestic major oil companies on Tuesday to discuss the implementation of global oil production curbs and the possible extension of the current level of cuts beyond June, sources familiar with the plans told Reuters.

The meeting is a further sign that Moscow is committed to supporting any future joint steps to stabilize oil markets for as long as may be required, after slashing its production to close to its quota under the global deal, Reuters said.

A source, familiar with the meeting detail, said no decision was made.

“Novak has just asked for opinions, whether to extend (the deal) or not. The opinions were divided almost equally,” the source said.

He added that it was decided to analyze the market, wait for demand to improve when the planes, grounded due to the coronavirus-combat measures, start to fly again.

Kommersant daily, citing three sources in oil industry, said Russia may keep the current level of cuts until September.

Hedge Funds Build Large Bullish Position in WTI

Hedge funds and other money managers continued to accumulate bullish positions in crude oil and its products last week but almost all buying remains concentrated in WTI, with little evidence of optimism in other futures contracts, Reuters said.

Portfolio managers purchased the equivalent of 30 million barrels in the six most important futures and options contracts in the week to May 19, exchange and regulatory data showed.

Fund managers have been net buyers in seven out of the past eight weeks, increasing their position by 292 million barrels since March 24.

WTI purchases totaling 216 million barrels have accounted for almost three quarters of all buying in the six major contracts since March 24. As a result, funds now hold a net position of 380 million barrels in NYMEX and ICE WTI, compared with only 158 million barrels in Brent.

After the lopsided buying, funds hold eight bullish long contracts for every short one in WTI, compared with ratios of only 2:1 in Brent, 3:1 in gasoline, 0.7:1 in heating oil and 1.3:1 in gasoil.

Daily Forecast

Russia looking to extend the production cut deal and hedge funds aggressively buying WTI crude oil are strong signs that the current one month rally is legitimate. Although we may see periodic setbacks, the news suggests that traders will likely be available to buy on the dips.

The current fundamentals are supportive, but bullish traders should stay on their toes just in case a second wave of coronavirus infections hits.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Continue to Test Gap

WTI Crude Oil

The WTI Crude Oil market went back and forth during the trading session on Tuesday, as we continue to struggle with the idea as to whether or not we are going to fill the gap above. Quite frankly, the oil market has been extraordinarily resilient, and there is some technical premise for doing so. Whether or not we can break above the $41 level, the top of the gap, is an entirely different question altogether. The 200 day EMA sits just above the $41 level as well, so that is also worth paying attention to. The hammer from the Monday session being broken to the downside could open up an attempt to break down through the $30 level.

Crude Oil Video 27.05.20

Brent

Brent markets went back and forth during the trading session on Tuesday as traders came back to work. At this point, the market looks as if it is a bit confused, dealing with the $37.50 level and the 50 day EMA underneath. At this point, the market is likely to go back and forth in the short term, but if we were to break out, then the $40 level will be the target. If we break above there, then it is possible that we go to the $45 level which is the top of the gap and where we will see the 200 day EMA come into play. A break down below the 50 day EMA would be negative and probably open up another couple of dollars’ worth of selling.

For a look at all of today’s economic events, check out our economic calendar.

Oil Price Fundamental Daily Forecast – Supported by Growing Confidence in OPEC+ Supply Cuts

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are inching higher on Tuesday, supported by growing confidence in OPEC and U.S. producer ability to trim production and reduce the global supply glut. Meanwhile fuel demand continues to pick up with more cars back on the road and industries reopening as coronavirus lockdowns ease.

At 11:38 GMT, July WTI crude oil is trading $34.04, up $0.32 or +0.95% and August Brent crude oil is at $36.59, up $0.48 or +1.33%.

The world’s major producers, including Saudi Arabia and Russia, agreed in April to cut their collective output by nearly 10 million bpd for May and June. OPEC+ countries are set to meet again in early June to discuss maintaining their supply cuts to shore up prices, which are still down about 45% since the start of the year.

Meanwhile in the United States, U.S. producers continued to make moves to lower output. Data from energy services firm Baker Hughes showed the U.S. rig count hit a record low of 318 in the week to May 22, also indicating lower output in the future.

On the demand side, Russia’s ministry on Monday quoted minister Alexander Novak as saying a rise in fuel demand should help cut a global surplus of about 7 million to 12 million bpd by June or July.

Russia Leapfrogs Saudi Arabia as China’s Top Crude Oil Supplier in April

Russia overtook Saudi Arabia as China’s top crude oil supplier in April, customs data showed, with imports rising 18% from the same month a year earlier as refiners snapped up cheap raw materials amid a price war between the two producers, Reuters reported.

Russian shipments reached 7.2 million tonnes last month, equivalent to 1.75 million barrels per day (bpd), according to data from the General Administration of Customs released on Tuesday. That compares with 1.49 million bpd in April 2019 and 1.66 million bpd in March.

Supplies from Saudi Arabia fell to 1.26 million bpd, down 1.53 million bpd in April 2019 and 1.7 million bpd in March.

China’s total crude oil imports in April came in at 9.84 million bpd, up from 9.68 million bpd in March, but well below 10.64 million bpd in April last year, according to data released earlier this month.

Still, imports during the first four months of the year were up 1.7% on a year earlier as Chinese oil refineries take advantage of slumping oil prices.

Daily Forecast

The early price action suggests the market is getting close to overbought, which is a technical issue. Traders are starting to see the upside potential of the market as economies begin to open, however, if they decide that value is important then we could start to see some profit-taking with the hopes of a break into a more favorable price area.

For a look at all of today’s economic events, check out our economic calendar.

Crude Oil Price Forecast – Crude Oil Markets Do Little During Holiday

West Texas Intermediate Crude Oil

The WTI Crude Oil market went back and forth during the trading session on Monday, forming a neutral candlestick. Ultimately, the market looks as if it is trying to go into the gap above, but it is struggling during the holiday session. The candlestick from the Friday session is a bit of a hammer shaped candlestick, which being broken to the downside would open up a “hanging man.” That of course is an extremely negative turn of events and should bring in fresh selling. On the other hand, if we rally from here, we will probably go looking towards the $41 level to fill the gap.

Crude Oil Video 26.05.20

Brent

Brent markets also did extraordinarily little during the trading session on Monday due to a lack of liquidity as well. This is a neutral candlestick that is trying to decide whether or not there is enough momentum to go higher, but quite frankly will not learn much about that during the holiday session. The 50 day EMA underneath offer significant support, so if we break down through that and of course the bottom of the hammer shaped candlestick, it should send this market down to the $30 level. You can see that the area just above at the $37.50 level has offered a significant amount of resistance, if we break above there, we will probably make an attempt to get into the gap which measures all the way to the $45 level above.

For a look at all of today’s economic events, check out our economic calendar.

Strong Buying of WTI: Subdued Gold Interest

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, May 19. A week were the questionable Moderna vaccine promise and reduced lockdowns spurred continued demand for riskier assets. US stocks resumed their rally with the S&P 500 rising by 2.3% while bond yields traded softer and Dollar index lost 0.6%.

The Bloomberg Commodity Index jumped 2.7% to reach a one month high with all the major energy and metal futures posting strong gains. However, while the energy and metal sectors had a strong week the net-long across the 24 major commodity futures tracked in this was close to unchanged due continued selling of most agriculture commodities.

Energy

Another strong rally in crude oil saw the combine net long in WTI and Brent rise by 26k lots to 507k lots, a 16-week high. Seven consecutive weeks of buying has resulted in bullish WTI bets rising almost three-fold to 348k, a 20-month high, while Brent buyers have only added 102k lots to 158k. While not yet overly stretched, the amount of buying has left the market exposed should the technical and/or fundamental outlook turn less friendly. Buying interest in Brent has been much more muted.

Following a four-week rally WTI crude oil has temporarily been boxed in between resistance at $35.20/bbl, the April high and support at $30.75/bbl, the uptrend from the lows. How the market handle these two levels will give us a clue about the current strength of sentiment in the market.

Buyers returned to natural gas following the recent slump. The 6.4% price jump attracted 24k lots of fresh longs resulting in the net long rising to 136k lots.

Metals

Silver’s 14% surge helped drive a 54% increase in the net-long to 21k lots, the highest since March 17. Gold investors meanwhile continued to flock to bullion-backed ETFs while funds only added 12.3k lots to their futures net-long. Despite hitting a fresh multi-year high on escalating tensions between US and China, and the potential for further stimulus, the net-long at 173k lots remained close to an 11-month low.

Copper traders was the least bearish since January as the price popped higher to reach a two-month high on China housing data and virus hopes. The net-short was cut by 26% to 9.7k lots.

Agriculture

Broad selling of food commodities continued with just four out of 13 futures contracts being bought. All the three major crops were sold, not least corn which saw a 15% increase in the net-short to 245k lots, a one-year high. One of the few exceptions was sugar as the continued rally in crude oil potentially could divert sugar canes back toward ethanol production instead of the sweetener.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Economic Data Puts the EUR in Focus, with Geopolitics and COVID-19 to also Influence

Earlier in the Day:

It was a particularly quiet day on the economic calendar this morning. There were no material stats out through the Asian session to provide any direction.

A lack of stats left the markets in the hands of chatter from the weekend and the latest COVID-19 news and numbers.

At the end of last week, news had hit the wires of China’s security law heading for Hong Kong, leading to some caution through the Asian markets.

Strong words from both the U.S and China as tensions have built tested market risk appetite early on.

While the rise in tension is certainly a concern, positive updates from COVID-19 vaccine trials provided support to riskier assets early on. The positive news was coupled with a continued downward trend in new coronavirus cases across the EU and the U.S.

Looking at the latest coronavirus numbers,

On Sunday, the number of new coronavirus cases rose by 100,455 to 5,497,427. On Saturday, the number of new cases had risen by 99,013. The daily increase was higher than both Saturday’s rise and 83,321 new cases from the previous Sunday.

France, Germany, Italy, and Spain reported 1,470 new cases on Sunday, which was down from 1,658 new cases on Wednesday. On the previous Sunday, 2,500 new cases had been reported.

From the U.S, the total number of cases rose by 20,190 to 1,686,436 on Sunday. On Saturday, the total number of cases had risen by 21,152. On Sunday 17th May, a total of 19,891 new cases had been reported.

The Majors

At the time of writing, the Japanese Yen was down by 0.01% to ¥107.65 against the U.S Dollar, with the Aussie Dollar down by 0.08% to $0.6532. The Kiwi Dollar was up by 0.01% to $0.6095.

The Day Ahead:

For the EUR

It’s a relatively busy day ahead on the economic calendar. Germany is back in focus, with 2nd estimate GDP numbers and May’s IFO Business Climate Index figures due out.

Barring a marked downward revision to the GDP numbers, the IFO figures will likely have the greatest influence.

As lockdown measures ease through May, the markets will be looking for a pickup in both business and consumer confidence.

Away from the economic calendar, expect the news wires to also influence. China and the U.S will be in focus as will any chatter from Brussels and EU member states on the COVID-19 recovery fund.

At the time of writing, the EUR was down by 0.02% to $1.0899.

For the Pound

It’s a quiet day ahead on the economic calendar. There are no material stats due out of the UK to provide the Pound with direction, with the UK markets closed.

A lack of stats leaves the Pound in the hands of Brexit and COVID-19 updates, both of which remain Pound negative.

While an easing in lockdown measures is positive, the continued spread of the virus across the UK has led to a delay of a more widespread opening of the economy.

With the UK’s neighbors taking more aggressive steps to ease lockdown measures, the UK economic recovery will likely trail behind those of the EU and the U.S.

At the time of writing, the Pound was up by 0.10% to $1.2185.

Across the Pond

It’s also a quiet day ahead on the U.S economic calendar, with no material stats due out to provide the Dollar with direction. The U.S markets are closed, which will leave volumes on the lighter side.

A lack of stats will leave the Dollar in the hands of any chatter from Beijing and the Oval Office and COVID-19 news…

The Dollar Spot Index was down by 0.08% to 99.787 at the time of writing.

For the Loonie

It’s a quiet day on the economic calendar. There are no material stats due out of Canada to provide the Loonie with direction.

Expect risk sentiment to provide direction on the day. While the tension between the U.S and China was negative, progress towards a COVID-19 vaccine was positive early on.

At the time of writing, the Loonie was up by 0.01% to C$1.3997 against the U.S Dollar.

Oil Price Fundamental Weekly Forecast – Simmering US-China Tensions Emerge as Issue that Could Cap Gains

U.S. West Texas Intermediate and international-benchmark crude oil futures finished higher last week, fueled by positive supply data and an optimistic outlook for demand now that countries have begun to ease coronavirus-related lockdowns and restrictions. Putting a lid on prices, however, were renewed concerns over U.S.-China relations.

Last week, July WTI crude oil settled at $33.25, up $3.73 or +12.64% and August Brent crude oil finished at $35.66, up $2.86 or +8.02%.

US Production Cuts Helped Trim Supply for a Second Week

The Energy Information Administration (EIA) reported Wednesday that U.S. crude inventories fell by 5 million barrels for the week-ended May 15, marking a second weekly decline in a row. That compared with a forecast by analysts polled by S&P Global Platts for an average increase of 2.4 million barrels.

The EIA data also showed crude stocks at the Cushing storage hub fell by about 5.5 million barrels for the week, easing concerns over tightening storage space.

Wednesday’s EIA report also showed that gasoline supply unexpectedly climbed by 2.8 million barrels, while distillate stockpiles rose 3.8 million barrels. Traders were looking for a supply decline of 3.5 million barrels for gasoline, while distillate stocks were forecast at 3.2 million barrels higher.

Escalating US – China Tensions Could Cap Gains

The end of the week weakness is being generated by profit-taking ahead of the long U.S. holiday weekend and escalating tensions between the United States and China. Some traders are also expressing concerns over the pace of demand recovery from the coronavirus crisis, but this is likely to become more of an issue next week once traders get data on U.S. Memorial Day holiday travel.

Prices reversed to the downside early Friday as the tensions between the U.S. and China centered on the former’s imposition of a new national security law on Hong Kong after months of anti-government protests in the Chinese-ruled city. Tensions between Beijing and Washington have risen in recent days, over issues such as the coronavirus pandemic as well as a bill that was passed which could force Chinese firms to delist on U.S. exchanges.

Adding to uncertainties, China refrained from setting a 2020 GDP growth target and pledged to step up spending and financing to support its economy, the first time that the Asian country did not set a gross domestic product (GDP) goal since 1990 when the government started to publish such targets, according to Reuters.

Baker Hughes Reports 10th Weekly Decline in US Oil-Rig Count

On Friday, U.S. Energy Services firm Baker Hughes reported that the number of active U.S. rigs drilling for oil dropped by 21 to 237 the week-ending May 22. The oil-rig count has now fallen for 10 weeks in a row, implying upcoming declines in domestic crude output. The total active U.S. rig count, meanwhile, also fell by 21 to 318, according to Baker Hughes.

This news is enough to underpin prices, but may not be enough to overcome the coronavirus demand destruction and rising tensions between China and the United States.

Weekly Forecast

Last week’s supply and demand data indicates that supply is being managed through compliance among OPEC+ members as well as U.S. production cuts. Demand is recovering in North Asia, particularly China, based on recent reports. And as Europe and the U.S. start to open up their economies, the demand should improve in those regions also.

However, the new wildcard is escalating U.S.-China tensions. At this time, the U.S. is challenging China on three fronts – coronavirus blame, stock market delisting for government controlled corporations and the threat of new tariffs if China interferes with Hong Kong’s government.

If the tensions between the two economic powerhouses continue to worsen over the near-term, then this could raise enough uncertainty to encourage crude oil traders to book profits and take to the sidelines on fresh worries over future demand.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Geopolitics, Central Banks and COVID-19 in Focus

On the Macro

It’s a busy week ahead on the economic calendar, with 57 stats in focus in the week ending 22nd May. In the week prior, 57 stats had also been in focus.

For the Dollar:

It’s a relatively busy week ahead on the economic data front.

A quiet 1st half of the week leaves May consumer confidence figures in focus on Tuesday. The markets will be looking for a pickup in confidence as the government eases lockdown measures. A continued rise in jobless claims, however, may lead to softer than anticipated numbers.

In the 2nd half of the week, April durable goods orders and weekly jobless claims will be in focus on Thursday.

While the markets may be able to stomach a slide in durable goods order, the weekly jobless claims will need to slide back considerably.

At the end of the week, April inflation figures, personal spending, and May’s Chicago PMI will also be in focus.

Barring any downward revision, we would expect 2nd estimate GDP numbers to have a muted impact on Thursday.

Other stats in the week include the April housing sector and trade data and finalized Michigan consumer sentiment figures. Expect the markets to also brush these numbers aside in the week.

Outside of the numbers, we will expect chatter from Capitol Hill and COVID-19 numbers to remain key drivers. On the monetary policy front, FOMC members will also draw more attention. At the end of the week, FED Chair Powell delivers a speech to wrap things up.

The Dollar Spot Index ended the week down by 0.54% to 99.863.

For the EUR:

It’s another busy week ahead on the economic data front.

In the 1st half of the week, key stats include German business and consumer confidence figures and 2nd estimate GDP numbers on Monday.

Barring a downward revision from 1st estimates, expect the consumer and business confidence figures to have a greater impact.

The markets will then need to look ahead to a relatively busy Friday.

Key stats include German and French retail sales figures for April and 2nd estimate GDP numbers from France.

The data is unlikely to have a material impact on the EUR, however. With the Eurozone in lockdown throughout April, the markets should be able to look beyond any dire numbers.

Over the course of the week, prelim May inflation figures are also due out but will have little influence.

For the EUR, a continued easing in lockdown measures and a downward trend in new COVID-19 cases is a must.

From the ECB, ECB President Lagarde is due to speak on Wednesday ahead of the ECB Financial stability review. Expect EUR sensitivity.

The EUR/USD ended the week up by 0.75% to $1.0901.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

There are no material stats due out of the UK to provide the Pound with direction.

A lack of stats will leave the Pound in the hands of Brexit and COVID-19 news updates.

We’ve seen the Pound under tremendous pressure as a result of the lack of progress on Brexit.

Boris Johnson has stated that, in spite of the lockdown, there would be no extension to the transition period. Based on progress to date, the chances of a hard Brexit have increased as a result. A change in stance by the British PM and the Pound would find support, else expect a reversal of last week’s gains.

Brexit news from the weekend was Pound negative…

The GBP/USD ended the week up by 0.47% to $1.2173.

For the Loonie:

It’s a relatively busy week ahead on the economic calendar.

For the Loonie, however, the markets will need to wait until Friday for economic data.

Key stats include 1st quarter GDP numbers and April’s RMPI.

We’ve seen GDP numbers from elsewhere. Will Canada see a similar contraction? Economists think so. It may be for that very reason that BoC Governor Poloz is scheduled to speak on Tuesday and Wednesday…

Away from the calendar, the upward trend in crude oil prices and a continued easing in lockdown measures remain Loonie positives. It remains to be seen whether crude can continue on the road to recovery, however.

Downside risks do remain. These include any signs of a 2nd wave pandemic and the U.S and China moving beyond words…

The Loonie ended the week up by 0.80% to C$1.3996 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

It’s another quiet week ahead for the Aussie Dollar.

Key stats include 1st quarter construction work done and private new CAPEX on Wednesday and Thursday.

On Friday, April private sector credit figures will also be in focus.

With the economy in meltdown going into April, however, we would expect the numbers to have a muted impact.

The RBA has talked of material contraction in the 2nd quarter, so don’t expect 1st quarter and April stats to do too much damage.

Expect COVID-19 updates and any U.S or China move to influence, however.

The Aussie Dollar ended the week up by 1.93% to $0.6537.

For the Kiwi Dollar:

It’s another relatively quiet week ahead on the economic data front.  Key stats include April trade figures on Tuesday and May business confidence figures on Thursday.

The RBNZ downplayed the market optimism in its last policy statement. That should limit any material upside for the Kiwi Dollar from the stats.

While trade data has stood up well considering the economic lockdown, will business confidence see some improvement?

Concerns over global trade terms and tourism will certainly be two major issues that businesses will continue to face.

Outside of the numbers, the RBNZ Financial Stability Report Wednesday will draw attention. The Kiwi will also be sensitive to any chatter or action from Beijing and Capitol Hill.

The Kiwi Dollar ended the week up by 2.68% to $0.6094.

For the Japanese Yen:

It’s a relatively busy week ahead on the economic data front.

The markets will need to wait until Friday for the numbers, however.

Key stats include May inflation figures and April industrial production and retail sales numbers.

With the Japanese government only just lifting the COVID-19 state of emergency, April figures are likely to be dire… There shouldn’t be too many surprises, however.

May inflation figures will also have little influence on the Yen. A pickup in crude oil prices will provide support but unlikely to be material, with consumption having tanked…

Outside of the numbers, risk sentiment will continue to influence, though it may be too soon for the Dollar to give up the safe-haven mantle…

The Japanese Yen ended the week down by 0.54% to ¥107.64 against the U.S Dollar.

Out of China

It’s another quiet week ahead on the economic data front. Economic data is limited to April’s industrial profits. No one is expecting any major rebound, which leaves the markets exposed to any accelerated decline…

Ultimately, the market focus will remain on COVID-19 news and moves by Beijing and Washington amidst the latest spat.

Beijing’s plans to impose a security law on HK will also need close monitoring… U.S President Trump has promised a strong U.S response to any such move.

The Chinese Yuan ended the week down by 0.39% to CNY7.1294 against the U.S Dollar.

Geo-Politics

UK Politics:

Brexit and lockdown measures remain the key areas of focus in the week ahead.

While the Pound found much-needed support last week, a lack of progress on Brexit will be an issue.

News hit the wires over the weekend of the EU beginning to prepare for a hard Brexit. This may price out the element of hope that has continued to support the Pound.

COVID-19 news will also be of influence, as the UK government struggles to contain the spread of the virus.

U.S Politics:

Rising tensions between the U.S and China will likely be a key driver in the week ahead.

If Trump signs the Bill to target Chinese companies, expect China to target U.S companies with heavy reliance on China…

The markets will also be watching to see how the U.S responds should China formally introduce the security law for HK.

The Coronavirus:

Easing measures will continue in the week.

We’ve yet to see a marked increase in the number of COVID-19 numbers across the EU or the U.S, though concerns will linger over what lies ahead. Some comfort will be taken from the fact that China reported zero new cases on Saturday.

From the market’s perspective, there are 3 key considerations that remain:

  1. Progress is made with COVID-19 treatment drugs and vaccines.
  2. The downward trend in new coronavirus cases continues.
  3. Governments continue to progress with the easing of lockdown measures.

All of this will need to translate into a marked decline in jobless claims and a pickup in consumer confidence and consumption… U.S Jobless claims figures released last week were disappointing, raising some doubt over how quickly the job markets will recover.

At the time of writing, the total number of coronavirus cases stood at 5,396,972, with the U.S reporting 1,666,246 cases to-date.

The Weekly Wrap – Optimism Delivered Riskier Assets a Boost as Lockdown Measures Eased

The Stats

It was a particularly busy week on the economic calendar, in the week ending 22nd May.

A total of 57 stats were monitored, following the 61 stats from the week prior.

Of the 57 stats, 28 came in ahead forecasts, with 25 economic indicators coming up short of forecast. 2 stats were in line with forecasts in the week.

Looking at the numbers, however, just 24 of the stats reflected an upward trend from previous figures. Of the remaining 33, 31 stats reflected a deterioration from previous.

For the Greenback, it was the 1st week in the red out of 3. The U.S Dollar Spot Index fell by 0.54% to end the week at 99.863. In the previous week, the Dollar had risen by 0.67%.

COVID-19 news, geopolitics, and central bank chatter continued to be key drivers in the week.

Looking at the latest coronavirus numbers.

The total number of coronavirus cases stood at 5,297,959, rising from last Friday’s 4,617,740 total cases. Week-on-week, the total number of cases was up by 680,119, on a global basis. This was higher than the previous week’s increase of 616,865 in new cases.

In the U.S, the total rose by 163,260 to 1,645,094. In the week prior, the total number of new cases had risen by 163,330.

Across France, Germany, Italy, and Spain combined, the total number of new cases increased by 19,110 to bring total infections to 872,494. In the previous week, the total number of new cases had risen by 29,514.

Out of the U.S

It was a relatively busy week on the economic calendar. On the economic calendar, however, the main area of focus was on the weekly jobless claims figures for the week ending 15th May.

Another 2.438m jump in jobless claims in the week tested risk sentiment and weighed on the Dollar.

While May’s prelim private sector PMIs were also out in the week, the numbers had a muted impact on the Dollar.

Housing sector conditions deteriorated drastically in April, by contrast, though much of this was attributed to the lockdown.

Existing new home sales slumped by 17.8%, in spite of U.S mortgage rates sitting at record lows.

FED Chair Powell had managed market expectations going into the week, talking of a slow economic recovery.

While the FOMC minutes and the FED Chair spoke of plenty of ammunition left to support the economy, rising tension between the U.S and China pressured the Dollar.

In the week, the House of Representatives passed a Bill to oust and ban Chinese companies from U.S exchanges.

China warned of retaliation and the rhetoric failed to ease over the course of the week.

In the equity markets, the Dow rose by 3.29%, with the NASDAQ and S&P500 gaining 3.44% and 3.20% respectively.

Out of the UK

It was a busy week on the economic calendar. April employment, inflation, and retail sales figures pinned the Pound back in the week.

A slower rate of contraction across the private sector failed to support a late rally in the Pound, with geopolitics in focus.

A lack of progress on Brexit and an extended lockdown were negatives for the Pound in the week. In spite of this, support kicked on off the back of Dollar weakness and hopes of a pickup in economic activity.

In the week, the Pound rose by 0.47% to $1.2173. The FTSE100 ended the week up by 3.90%, reversing a 2.29% loss from the previous week.

Out of the Eurozone

It was also a relatively busy week economic data front, with the stats skewed to the positive for once.

ZEW’s May economic sentiment and consumer confidence figures were in focus in the 1st half of the week.

In Germany and the Eurozone, economic sentiment amongst economists improved, with consumer confidence also improving across the Eurozone in May.

May’s prelim private sector PMIs also pointed to a possible bottoming out in April, which supported the EUR.

Positive stats, progress towards a COVID-19 recovery fund and a continued easing of lockdown measures delivered the upside in the week.

From the ECB, the monetary policy meeting minutes had a muted impact. There were no surprises, with the minutes continuing to call for fiscal support from member states.

For the week, the EUR rose by 0.75% to $1.0901, reversing a 0.18% loss from the previous week.

For the European major indexes, it was a bullish week. The DAX30 rallied by 5.82%, with the CAC30 and EuroStoxx600 gaining 3.90% and 3.63% respectively.

Elsewhere

It was a particularly bullish week for the Aussie Dollar and the Kiwi Dollar, with a Friday pullback being the only day in the red.

In the week ending 22nd May, the Aussie Dollar rose by 1.93% to $0.6537, with the Kiwi Dollar up by 2.68% to $0.6094.

For the Aussie Dollar

It was a particularly quiet week for the Aussie Dollar on the economic data front.

There were no material stats to provide the Aussie Dollar with direction. That left the Aussie Dollar in the hands of market risk sentiment and the RBA meeting minutes from Tuesday.

While the minutes painted a grim picture, however, upbeat sentiment towards an easing of lockdown measures delivered the upside.

The gains came in spite of rising tensions between the U.S and China. There was also talk of positive results in early COVID-19 vaccine trials…

For the Kiwi Dollar

It was a quiet week on the economic calendar.

Key stats included 1st quarter wholesale inflation and retail sales figures.

While the numbers were skewed to the negative, there was little interest in the Q1 figures.

Rising demand for commodities from China and an easing of global lockdown measures delivered the upside.

For the Loonie

It was a busy week on the economic calendar. Economic data was limited to March and April stats, however, that garnered little attention.

As expected, inflationary pressures eased further, with consumer prices on the slide in April.

The effects of COVID-19 were evident in March retail sales figures as well, which disappointed on Friday.

Ultimately, a jump in crude oil prices in the week, fueled by news of a jump in demand and falling output delivered the upside.

The markets are expecting demand to pick up as lockdown measures ease further. This was also positive for the Loonie in the week.

A sharp pullback on Friday limited the upside, however, as the Loonie slid back from C$1.38 levels.

The Loonie rose by 0.80% to end the week at C$1.3996.

For the Japanese Yen

It was a busy week on the data front. Key stats included 1st quarter GDP and April trade figures, and May private sector PMIs.

At the end of the week, April inflation figures were also in focus. It was a mixed bag on the data front, leaving the Yen in limbo.

While the economy contracted at a slower pace, trade data going into the 2nd quarter was particularly dire. Exports tumbled by 21.9%, with imports also in decline.

Private sector PMIs delivered little confidence on Thursday, with manufacturing sector activity contracting at a faster pace.

Adding more angst was the return of deflation in April, with core consumer prices falling by 0.2% year-on-year…

In spite of a pickup in market risk appetite in the week, the Yen failed to find support.

The Japanese Yen fell by 0.54% to end the week at ¥107.64. In the week prior, the Yen had fallen by 0.38% against the U.S Dollar.

Out of China

There were no stats in the week for the markets to consider. On the monetary policy front, the PBoC also left loan prime rates unchanged, leaving geopolitical risk in focus.

There was plenty to consider in the week as a Bill to oust Chinese firms from U.S exchanges progressed.

China responded with threats of its own before the news hit the wires on Friday of a new security law heading HK’s way. The law is set to ban acts against the government in a bid to end future protests. Unsurprisingly, the threat of more protests and riots weighed heavily on risk sentiment at the end of the week…

In the week ending 22nd May, the Yuan fell by 0.39% to CNY7.1294 against the Greenback.

The CSI300 and Hang Seng ending the week down by 2.27% and by 3.64% respectively. A Friday sell-off left the pair in the red as the markets responded to the news of China’s proposal to impose the security law on HK SAR.

Crude Oil Weekly Price Forecast – Crude Oil Markets Hit Brick Wall

West Texas Intermediate Crude Oil

The West Texas Intermediate Crude Oil market try to reach towards the $35 level during the course of the week but then pulled back a bit. It looks as if there is a lot of resistance just above, especially as there is a gap there. Whether or not we can fill the gap is the next question, and if we do the market could go as high as $41. Ultimately, the market has a lot of things to worry about, not the least of which is the fact that the demand for crude oil is probably lower. However, we have seen a lot of supply destruction, so I think you will see a lot of noise in general, but at this point it is likely that we will see a short-term verse, only to pull right back down.

WTI Oil Video 25.05.20

Brent

Brent markets also try to rally, but unlike the West Texas Intermediate Crude Oil market, the Brent market has the problem that it is much more global, meaning that it has to deal with a large group of failing economies. That being said, the candlestick does look negative and we could have a pullback to the $30 level. However, if we break above the top of the weekly candlestick that I believe this market probably goes looking to fill the gap above near the $45 handle. Either way, longer-term traders again to continue to have a lot of to think about, as the global economy has most certainly changed and for a much longer time than some talking heads are saying. At this point, the market has some deciding to do.

Crude Oil Price Forecast – Crude Oil Markets Continue to Show Signs of Resistance

WTI Crude Oil

The West Texas Intermediate Crude Oil market pulled back a bit during the trading session on Friday, as the market has gotten a bit too far ahead of itself. As the WTI market is facing a major gap above, I would anticipate that there are going to be sellers looking to take advantage of that. Furthermore, although gaps do tend to get filled, they do not necessarily have to. Sometimes, you get to a bottom region of a gap and then turn right back around. That might be what is happening here. We will have to see but if we break down below the bottom of the candlestick for the trading session on Friday, then I would be a seller at that point, looking for a move closer to the $28 level.

On the other hand, if the market breaks out above the high from the Thursday session, then it is likely that we go looking towards the $40 region which is near the top of the overall range of the gap.

Crude Oil Video 25.05.20

Brent

Brent markets pulled back a bit as well, as we had reached an area that caused a bit of resistance on Thursday. The 50 day EMA is sitting just below though, so that could also offer support, so it is likely that we will see buyers underneath as well. However, if we break down below the 50 day EMA then the Brent market probably start to sell off. At that point, the market is likely to go looking towards the $30 level. Either way, I think we are going to have a lot of volatility.

Oil Price Fundamental Daily Forecast – Escalating US-China Tensions Encouraging Profit-Taking

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are down over 5% on Friday as escalating tensions between the United States and China encouraged long investors to take profits ahead of the weekend. Prices were also pressured by concerns over the pace of demand recovery from the coronavirus crisis.

At 10:42 GMT, July WTI crude oil futures are trading $31.80, down $2.12 or -6.25% and July Brent crude oil futures are at $34.18, down $1.88 or -5.21%.

Prices reversed to the downside early Friday as the tensions between the U.S. and China centered on the former’s imposition of a new national security law on Hong Kong after months of anti-government protests in the Chinese-ruled city. Tensions between Beijing and Washington have risen in recent days, over issues such as the coronavirus pandemic as well as a bill that was passed which could force Chinese firms to delist on U.S. exchanges.

The draft law was announced at the annual National People’s Congress (NPC), the Chinese parliament, which kicked off on Friday. The laws would reportedly ban secession, foreign interference, terrorism and all seditious activities aimed at toppling the central government and any external interference in the former British colony, according to Reuters.

Adding to uncertainties, China refrained from setting a 2020 GDP growth target and pledged to step up spending and financing to support its economy, the first time that the Asian country did not set a gross domestic product (GDP) goal since 1990 when the government started to publish such targets, according to Reuters.

Chime Do, head of Greater China Investments at Barings, said short-term traders were mostly concerned with the absence of a growth on Friday. “The market was hoping they would give some kind of number, 2% or 3%, but that wasn’t available.”

Daily Forecast

With U.S.-China relations strained on three fronts – coronavirus blame, stock market delisting and Hong Kong – the tensions between the two economic powerhouses are likely to worsen over the near-term, which could raise just enough uncertainty to encourage crude oil traders to book profits and take to the sidelines on concerns over future demand.