Crude oil steady as investors weigh demand against supply forces
|For oil, the focus continues to be mainly on the supply side of the equation rather than demand. Although concerns over demand have come into sharper focus again, owing to further weakness in economic data, ultimately, though, Saudi Arabia and co. in the OPEC+ group of producers want higher oil prices and to achieve that they continue to restrict supply of the stuff to artificially boost prices. At the same time, we have seen in the US two unexpected drops in oil inventories in as many weeks and a decline in drilling activity over the past few months. US (shale) oil production may be levelling off, in other words. So, we are likely to see further consolidation and side-ways trading in oil for a while unless demand concerns deepen further, especially from places like China and other emerging market economies.
From a technical point of view, we are watching price action closely after WTI created two doji/small hammer candlestick patterns in three days – one at just above the $60 hurdle on Thursday of last week when it hit a fresh high for the year at $60.37, and the other yesterday around the $58 level. Depending on which of these patterns prove to be the correct signal, we could potentially see a sharp move in the direction of the break. So, a potential break below Monday's low would be a short-term bearish development while a move above last week's high would keep the bulls in charge.
Figure 1:
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.