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Oil prices eased on Thursday after OPEC and allies such as Russia agreed to taper record supply curbs from August, though the drop was cushioned by hopes for a swift U.S. demand pick-up after a big drawdown from the country’s crude stocks.
Brent crude fell 29 cents, or 0.69%, to $43.50 a barrel and U.S. West Texas Intermediate (WTI) crude dropped 35 cents, or 0.85%, to $40.85 a barrel, at the time of writing. Prices rose 2% the previous day, helped by the U.S. crude inventories drop.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, agreed on Wednesday to scale back oil production cuts from August as the global economy slowly recovers from the coronavirus pandemic.
OPEC+ has been cutting output since May by 9.7 million barrels per day, or 10% of global supply, but from August, cuts will officially taper to 7.7 million bpd until December.
Data from the Energy Information Administration showed U.S. crude inventories fell 7.5 million barrels last week, shrinking much more than the 2.1 million-barrel.
The OPEC+ accord said production cuts in August and September would end up amounting to about 8.1 million-8.3 million bpd, more than the headline number. That’s because countries in the grouping which over-produced earlier this year would compensate by making extra August-September cuts.
Oil prices are expected to remain boxed in as more supply from OPEC+ countries will likely be absorbed by recovering demand.
Market estimates that oil prices will stay where they are for the rest of 2020 as any uptick will hurt already struggling refining margins and negatively impact the most-needed recovery in refinery runs.
International Energy Agency reported on Wednesday that global oil markets are slowly rebalancing after the shocks seen during the coronavirus lockdown, with prices expected at about $40 per barrel in the coming months.
On the technical front, the RSI is at 57.01% and suggests that the market can move in an upward direction. The current price is trading above the 20 days and 50days Moving Averages but is trading below 5 days moving average. The stochastic is forming an downside crossover.
Overall Bias is Positive and Short-term trades can be initiated with below mentioned Stop Loss and Profit targets.
Trade Suggestion—SHORT SELL at $40.80 Take Profit at $39.70 Stop Loss at $41.50