Crude oil stabilizes after a turbulent Crude oil price week. This past week, crude oil was able to rise from its lows, but concern still exists.
Crude Oil is maintaining its steady trend
After rebounding to finish off the week prior, crude oil is maintaining gains made as it begins this week. Several risk types of assets saw gains on Friday as a result of some strong US employment data.
In April, the US added 253k non-farm employment, significantly more than the 160k forecast and the previously reported 165k. The jobless rate dropped to its lowest point since 1969 last month, 3.4%.
Chinese tourist travel statistics that showed 274 million peninsula domestic travelers were made throughout the Golden Week. Served to boost sentiment even more. This is a shining example in a market that has generally been disappointed with the economic recovery following China’s openness.
The OPEC+ Factor
After what seemed to be a flash fall on Thursday, crude oil had been struggling for the majority of the previous week.
After the OPEC+ output reduction decision, the WTI futures contract traded approximately 24% below its high in April. Since then, it has bounced back to being down only about 14% today while trading over US$ 71.
According to OPEC+, their early June meeting in Vienna will take place in person as opposed to virtually. Some analysts believe this to mean that the cartel is planning to become more active in boosting the price of oil. And that more output cutbacks may be on the way.
The OPEC+ oil market update for the current month is scheduled to be issued on Thursday.
The RBOB crack spread
On the negative side, as the RBOB crack spread declines, certain structural problems may be hurting oil. The RBOB crack spread measures the cost of gasoline in relation to the price of crude oil and indicates the refiners’ margin of profit.
Reformulated blendstock for hydrate blending is known as RBOB. It is a gasoline class that may be traded. Lower refiner revenue might result in a decline in demand for petroleum. Despite weak EIA inventory data from the previous week, this indicator has dropped.
Source: EIA
According to the OVX index, volatility decreased during the petroleum rebound. indicating that the market may be OK with the existing pricing. However, the price spread across the front two WTI futures contracts is rather small and may indicate that the market is now somewhat stable.
What is OVX Index?
The U.S. Oil Fund’s (USO) United States Oil Fund Volatility Index (OVX) is used to assess the projected 30-day volatility of crude oil prices. OVX is derived by applying interpolation to a pair of time-weighted summations of option mid-quote amounts. Namely this instance options on the USO ETF, just like the Cboe VIX Index®.
Technical Perspective and Outlook
A huge negative wick that is larger than the candle’s body can be seen on the weekly chart for WTI. Indicating the purchasing pressure that peaked on Thursday and Friday. This week, the 200-day MA provided some support but the 50 and 100-day MA continued to pose a death cross risk. On the weekly graph, it appears that since November 2022. We have been trading in a fairly broad spectrum, with the bottom of the range. Resting around $64.50 and the high resting around the $83 per barrel level. Only a weekly candle closing below the March 13 low around the $66 a barrel handle changes the general trend of price action and structure. that remains positive on a weekly basis.
On the daily level, the week ended bullishly with a Morningstar candlestick structure that broke out of the oversold zone on the RSI. We are confident that the bull comeback will continue into the next week. Because of this and the magnitude of the tip on the weekly candle. A daily candle closing over the $76.70 per barrel level is required until the pattern on a daily basis turns positive. Key resistance levels lie ahead. Any rise from the present price is still vulnerable to a downward trend continuing under the $76.70 level.
