⛽ OIL falls 2% at the end of the week

Lower Wall Street profits and profit-taking put pressure on oil prices

STI– and Brent-Crude Oil is down more than 2% today, breaking a three-day bullish spiral. Despite this, this week is likely to end on a strong note, marking the third consecutive week of gains. Looking at the prospects of the last few months, the oil price has recovered significantly.

Also, we believe that today’s move is not related to fundamentals and is simply taking advantage of the plentiful liquidity for profit taking. There are still a number of supportive factors for oil:

• Continued dollar weakness – EURUSD currently around 1.1200
• OPEC+ cuts are having a real impact on supply reduction
• OPEC upgrades demand expectations for this year by 0.1 mbd
• Libya closes half of oil fields amid protests

We don’t see a resumption of bullishness in the dollar today. The only negative factor for the oil price this week was the sharp increase in oil inventories. However, looking at the chart shows that WTI oil prices have declined significantly after testing the 200-session moving average. We saw a similar downward trend in April, when OPEC+ surprised with its first major cuts. However, now supply is so constrained in real terms that it is affecting pricing, so we expect the uptrend to continue for the foreseeable future.

Technically, we are obviously reacting to an important resistance. The closest oil demand zone is $72.5-73.5 per barrel. However, to confirm our profit-taking thesis, it is worth looking at the downturns in the gold or to heed the mixed mood on Wall Street.

source: xStation5 by XTB

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