WTI bears eye a continuation to test $70.50s

West Texas Intermediate, WTI, is currently trading at $71.93 and has traveled between a low of $71.03 and $74.33. Meanwhile, comments from Russia's oil minister, who said next month's OPEC+ meeting was unlikely to end with further cuts to production, have weighed on the black gold. 

Reuters reported Russian oil minister Alexander Novak said further cuts from OPEC+ were unlikely following more than one-million barrels per day of voluntary cuts that took effect at the start of May.

´´The likelihood of OPEC cutting further only a month later is low. Signs of stronger demand should provide some comfort to bullish speculator,´´ analysts at ANZ Bank said. ´´Chinese demand is growing strongly as restrictions on international travel into China are eased. The rise in gasoline demand in the US comes ahead of the US holiday weekend.´´

Meanwhile, analysts at TD Securities explained that´´Saudi Arabia's warning shot to short sellers managed to squeeze CTA trend follower shorts, but only for a single trading session. WTI crude and Brent crude prices are now catching up with the ongoing deterioration in commodity demand trends, after a large-scale short covering program from algorithmic trend followers provided a sufficiently large offset for prices to buck the trend.´´

´´With price action already turning over, CTAs are likely to aggressively add back some shorts. In fact, we estimate that algos are set to add a whopping -21% of max size to their net short in WTI crude, along with -11% in Brent. This flow will help give credence to the slumping demand narrative, as China continues to battle with a surge in Covid-19 infections,´´ the analysts explained further. 

WTI technical analysis

The bulls have moved in and are reaching a resistance area, breaking a 50% mean reversion level. If the bears were to commit, then there will be prospects of a move into $70.50s.