CRUDE OIL PRICE OUTLOOK

What did OPEC+ decide?

Now OPEC+ has stuck to their plan to cautiously raise output by 350,00 BPD in June and 440,000 BPD in July as expected but stopped short of discussing what comes next after July, which doesn't give us a strong perspective but considering the Saudi led cartel thinks demand is projected to grow fast the market is set to face a considerable deficit under these assumptions. The group's cautious return to the market and no clarity on Iranian production has created a bullish setup for crude oil, reaching $70+

For the ones curious as to where this demand is being facilitated from?

US manufacturing beats all the expectations yesterday and increased from 60.7 in April to 61.2 in May. The new orders also increased, and supplier deliveries are at the highest level since 1974; a clear sign overheating is not easing up yet. Overall the numbers fit with our expectations that overheating will be with us for the summer but should ease during h2.

There is optimism that growing summer travel and reopening economies will easily accommodate additional OPEC+ production increases and even a possible Iranian return to the market, given that the slow progress of Iran nuclear talks is providing breathing room for demand to catch up before Iranian oil actually returns to the market.

Demand is projected to grow by over 5 million b/d in H2-2021, and there will likely be a considerable deficit during the next six months. Why? Since the OPEC+ cautious supply will not keep up with demand growth, it could be argued that the producer group will likely increase production once these risks are mitigated, as we believe they want to regain their market share and do not want a price spike which would incentivize US shale producers to destroy demand.

API weekly inventory data is to be released today, where a build-up in inventory could accelerate downside momentum. The indicator gives us an overview of US petroleum demand. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for oil prices and vice versa.

The Energy Information Administration (EIA) will report weekly inventory data later today; however, we already anticipate a 2.27-million-barrel draw in stockpiles. Total inventories have fallen to a three-month low of 484.35 million barrels, and this trend looks set to continue with the arrival of the summer driving season.

To summarize, this data, in particular, helps us look for sell reaching for 66.50- 65.5 level that is a move below $67.50 may push prices lower with $66.20 as the next support target.

Technically, we need to keep in mind that WTI has breached above a critical resistance level at 66.50 this week and thus opened the door for further upside potential. We should be expecting the overall trend to be bullish, as suggested by the upward-sloped SMA lines in the below chart. The MACD indicator attempts to breach a downward trend line, showing that bullish momentum maybe building.

However, the previous resistance that is --$66.50-- has now become an immediate and important support level because the bull run has left behind a series of liquidity gaps that means inefficiency which certainly shall be tested before going for higher levels.