The oil market is on a decline today, nervously anticipating the WTI June contract expiration. Investors fear a potential drop in oil prices similar to the one that took place a month ago when WTI prices fell into the negative zone.
Since then, the market situation has changed. The largest oil producing countries have significantly reduced production volumes. Many countries have weakened quarantine measures, contributing to an increase in energy demand. A number of OPEC countries led by Saudi Arabia announced a further reduction in production in June. All these factors contributed to the establishment of a more acceptable balance of supply and demand on the market. But the problem of the lack of free reserves for oil storage remains relevant, therefore, the risk of a significant reduction in quotations at today's auction remains quite high.
A good support factor for the oil market today will be the situation on stock exchanges and the USD dynamics. Amid news of successful trials of a new vaccine from COVID-19, stock indices are trading in the green zone, and USD is losing ground on the market.
A weekly API report on the dynamics of commercial oil reserves in the United States is expected to be published by the end of today’s trading session.
Regarding the chart, we note two unsuccessful attempts from buyers to gain a foothold above the level of 32.10. Now bears are keeping the price below this mark, which is a signal for development of a downward movement with target levels of 30.30 and 26.90.
The main scenario - a decline towards 30.30.
An alternative scenario - a consolidation above the level of 32.10 and an increase towards 33.75.
The current fundamental outlook is neutral. We consider shorts with very moderate risks. We would expect for the entry points to be found in the range of 32.10-32.50.
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