Good day and welcome to a recap of the most recent news and price action regarding USOIL. Governments worldwide are in the process of easing lockdown restrictions which is a positive for the oil market. More companies/business will finally be able to operate which will lead to an increase in fuel consumption. Added to this, OPEC and OPEC+ members have began cutting production costs which also is a positive for this market.
Taking a look at the weekly timeframe, we can see that the month of May closed on a bullish note with price slowing down towards the end as we can see with last weeks candle closure. With the new monthly candle opening, we may see a pullback before a continuation into the highs. During the month of May OPEC made a production cut of 5 million barrels per day compared to April, a 5% cut of global supply. They are aiming to further cut production to 10% of global supply this month, looking to further stabilize the oil economy. The direction of the market will hang heavily on the ability of OPEC and OPEC+ members to comply fully to the output curbs and regulations.
On the daily timeframe we can see how strong last weeks close was. On the 29th of May we broke that beforementioned area of consolidation, $30 – $35 and closed with a morning star formation as well as a 3 pin pattern. This weeks Crude Oil Stock and Inventories report will be a key aspect to look out for on Tuesday and Wednesday respectively. This will give us more insight into how well OPEC members are complying to the production cuts and whether they can maintain this positive momentum going forward.
On the 1 hour chart we can see exactly how price broke out of the area of consolidation last week Friday, with a strong closing of $35.18. Today, the bears attempted to bring price lower but were not able to keep the price below $35. We had a lovely three pin pattern where we can also see a clear rejection of the area of consolidation as the bulls begin to drive the price upwards from todays low of $34.25. $40.00 will be the next level of resistance.
Once more countries continue to ease lockdown restrictions worldwide, the demand for oil will increase as economic avtivity will begin to return to normal. Added to this, if OPEC and OPEC+ countries continue to comply with production cuts throughout this year and heading into next year, we could see price stabilizing in the near future. The only foreseeable threat to this market is the second wave of the Coronavirus and how badly it will affect us and in turn businesses and companies worldwide. As always, trade safe and have a great week further. Subscribe to our blogs for direct access from your email.