Crude Lower Over Uncertain Supply/Demand Outlook

Oil prices fell over a percent on Friday over uncertainty re the supply/demand outlook following the EIA showing a US crude stock drawdown but product builds. The USD index finished 0.1% higher on the back of higher yields following a pickup in University of Michigan 1-year ahead inflation expectations. This data also drove oil prices lower as it suggests a Fed cut isn’t imminent.

• WTI decreased 1.3% to $78.20 from a high of $79.96 earlier. It has started today testing $78 and is currently at $78.06. A bearish theme remains intact with support at $76.89. Initial resistance is at $81.00, 20-day EMA. Today’s low of $77.98 approached the 100-day simple moving average of $77.96.
• Brent fell 1.3% to $82.78/bbl, close to the intraday low. The benchmark remains vulnerable and there is scope for it to move down to $80.24. Initial support is at $81.71 and resistance at $85.45, 20 day EMA.
• Attention has shifted to the June 1 OPEC+ meeting where existing output cuts are expected to be extended into H2. Iraq wouldn’t comment on this possibility but said that it would not agree to further reductions. The oil minister said that Iraq had made enough cuts.
• Easing geopolitical concerns in the Middle East and uncertainty over the supply/demand outlook have resulted in a significant unwinding of oil longs with money manager positions down 53k in the week to May 7, according to ICE Futures Europe. Hedge funds reduced bullish gasoline positions to lowest in 6 months according to Bloomberg.