• Brent reached a high of $32.40 rebounds more than 90.0% from April’s low.
  • Focus on three oil reports

The Brent crude oil came under renewed selling pressure at the start of this week resulting in Brent falling back below $30.00 level. The price is now facing stiff resistance at 50-MA. A decisive break above would open up further higher towards $34.00 and $36.50. As we highlighted in our previous Commodity weekly reports, the fundamental justification for a limited headroom heading into the end of Q2 has strengthened in recent days.

Daily indicators mixed, watch out for a pullback towards the support level around $28.20 its 20-MA before that around $29.40. The price has been consolidating in a narrow range for five trading days. There will need to be a breakout above last week’s high to envisage an extension towards the above given levels.

Readers can remind our bullish targets at $29, $31 and $33 its 50-MA. And now we request to take profit on the long Brent oil position with a P&L 50.0%.

Turning to fundamentals, big news hit the wires on Monday, but the price failed to react positively. Saudi Arabia announced on Monday that it would cut oil output beyond its OPEC+ production pledge. The latest production cut news drew some attention, but the price failed to come out of the narrow range.

  • Saudi Press Agency reported, “A Saudi Ministry of Energy Official stated that the Ministry directed Saudi Aramco to reduce its crude oil production, for the upcoming month of June, by an extra voluntary amount of one million barrels per day, in addition to the reduction committed by the Kingdom in the latest OPEC+ agreement, on 12 April 2020”.
  • Australia and New Zealand Bank (ANZ Bank) said the move would take Saudi Arabia’s output to the lowest level since mid-2002.
  • Following the announcement from Saudi Arabia, the UAE and Kuwait announced that they would also cut by an additional 100Mbbls/d and 80Mbbls/d respectively over June, ING reported.

Technically, we maintain our rangebound stance as traders focus turned to the EIA, OPEC, and IEA reports.

  • EIA will release Short-term Energy Outlook. It is scheduled for the first Tuesday after the first Thursday of the month.
  • OPEC will release the Monthly Oil Market report on Wednesday, 13 May.
  • IEA will release its monthly report on Thursday, 14 May.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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