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U.S. West Texas Intermediate and international benchmark Brent crude oil futures are trading lower on Monday. There hasn’t been a follow-through to the downside after Friday’s steep sell-off, putting the market inside the previous day’s range. This may be an indication of investor indecision and impending volatility. The lack of follow-through to the downside may also be indicating that investors are waiting for fresh news.
At 08:32 GMT, June WTI crude oil futures are trading $62.92, down $0.38 or -0.60% and July Brent crude oil is trading $71.11, down $0.52 or -0.73%.
Prices continue to be capped by Friday’s steep sell-off that was fueled by comments from President Donald Trump, demanding that OPEC and its allies raise production to soften the impact of the expanded U.S. sanctions against Iran.
Prices fell because Trump indicated he had spoken with Saudi Arabia about reducing the impact of lower Iranian oil exports by increasing flows elsewhere. However, according to a report in the Wall Street Journal this conversation may not have taken place.
Gains are also being capped by a jump in weekly U.S. inventories as reported by the U.S. Energy Information Administration. The International Energy Agency also said last week that there was an adequate supply of crude oil. This may have started the initial weakness last week.
Daily Forecast
It looks as if Trump’s comments were enough to drive some speculative longs out of the market on Friday. However, the market continues to be supported by the OPEC-led supply cuts and the sanctions against Iran and Venezuela. Traders just aren’t sure if Saudi Arabia and its friends will provide additional supply.
There are also reports that Russia is preparing to ramp up production levels to meet China’s crude oil demand needs as Beijing tries to replace the imports it usually gets from Iran. Traders are also expressing concerns that Russia may leave the OPEC Group after its deal expires in June.
The early price action suggests traders are waiting to see if the Saudi’s cover any shortage from Iran, but we may not know anything until the new sanctions begin after May 1.
This article was originally posted on FX Empire