On Friday last week, ahead of the long holiday weekend, oil futures closed lower with the U.S. benchmark only just scoring its 10th straight weekly gain. This comes on investor concerns which persist over the global oversupply of crude.
After the inflation reading came out on Friday stronger-than-expected, the U.S. dollar (USD) increased weighing on dollar-denominated commodities like crude oil. On the New York Mercantile Exchange, WTI crude oil for delivery in July (CLN5) closed at $59.72 a barrel, dropping $1, or 1.7%. This contract dropped 1.4% for the week.
When tracking the contracts that are most active, prices slightly increased by 0.05%, or 3 cents, from last week’s most active June crude which closed $59.69 a barrel. Since the week that ended on March 20, prices based on the contracts that are most active have increased.
Meanwhile, on the London’s ICE Futures exchange, July Brent crude dropped $1.17, or 1.8%, to trade at $65.37 a barrel. For the week, this commodity was down 2.1 percent.
On Wednesday last week, U.S. government data indicated that the previous week’s oil supplies dropped. Production however in the lower forty-eight states did not drop as some expected. Citi Futures analyst, Tim Evans, said in a report that oil markets are indicating some gain in confidence that the market would rebalance as demand increases and U.S. shale-oil production decreases.
However, the strengthening demand as well as the fall in the production of oil in the U.S. is not sufficient enough in order to balance the market out. Added to this, a decline in the supply from OPEC is necessary which has not happened so far, according to Evans.
It seems that the market has placed little emphasis on the productions levels and supply by OPEC which has caused a supply glut in the market. According to Evans, this will need to be addressed since the OPEC summit meeting will take place on the 5th of June and also, investors have shown a clear lack of profit taking which can continue to negatively impact the oil price.
MT4 Chart: Oil
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