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$50 bbl proving to be a formidable obstacle

Published Friday, May 27th, 2016

Front month Brent and WTI both broke through the $50 bbl barrier yesterday but were unable to hold on to the gains. The trigger for the gains was news of further militant action in Nigeria which followed on from a large crude oil stock draw in Wednesday’s EIA weekly US stock figures. By the close Brent had settled back to $49.59 (-0.15) and WTI to $49.48 (-0.08).

Speculators are clearly very cautious at these price levels. Canadian production is coming back but Nigerian militancy is a worry. All the signs are that the OPEC meeting will end with no new developments and the Saudis are sending out a series of smoke signals that they will be increasing production and soon. Then there is dollar strength to consider with a Federal Reserve hike in June back on the table. We may even find that today’s Baker Hughes rig figures show an increase in rig usage after last week’s ‘no change’.

Not so cautious is Donald Trump. When speaking at an oil conference in North Dakota you give what the audience wants to hear. They want to hear that Keystone XL will be approved, that environmental legislation will be rolled back and that America will achieve oil independence from the Middle East. They got all of the above plus a promise that the US will “cancel the Paris agreement”.

to read the rest of the report, please click here

Posted by David Hufton