- WTI drifting lower in Asia open within wide consolidation.
- EIA report continues to show that the worst may well be behind us.
Optimism over production cuts is helping to keep the price of a barrel of oil elevated. Friday's close was positive for oil futures with rising demand for gasoline lifting to US benchmark prices up by 25% last week. At the time of writing, West Texas Intermediate crude is trading at $25.85 having edged lower in the open from a high of $26.12 to $25.56.
West Texas Intermediate crude for June delivery on the New York Mercantile Exchange, rose $1.19, or 5.1%, to settle at $24.74 a barrel on Friday. Prices were correcting the weaker prices that came of doubts over compliance with an agreement to cut global production and general doom and gloom comments from central bankers.
Saudis willing and able to support energy markets
Last week, the Saudis raised their official selling price for crude, helping prices rally in yet another sign that the Kingdom is willing and able to support energy markets in the aftermath of the price war:
This follows signs of improved demand and a weekly EIA report which continued to show that the worst may well be behind us.
We continue to argue that the market, in combination with large scale OPEC+ cuts, is contributing to a Great Rebalancing which should continue to see extreme contangos ease in the coming months.
We remain long Dec-Dec WTI spreads, anticipating that the left tail has sufficiently narrowed for market participants to begin eyeing opportunities.
Our ChartVision framework also suggests a Mar21 WTI $44/bbl call could benefit from a trend reversal amid a Great Rebalancing.
CTAs remain positioned for further downside, and we do not expect significant flow from this group of participants,
– analysts at TD Securities explained.
WTI levels
The price of WTI is consolidating ina wide range between the $24 and $27 handles. The $27.80s have proven to be a tough level of resistance and the market could be topping. $24.20s are important at this juncture which will need to hold in any case of a bout of supply.
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