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Crude Oil Futures (CL) trading above 120.00 Ahead of US Crude Oil Inventories.

  • Demand pressures are pushing oil prices higher.
  • Investors expect inventories to go down in the US due to the expected rise in demand.
  • China is on the path to reducing its inventories as it reopens.
  • Crude oil bulls are experiencing resistance at 120.00 on the charts.

Crude oil futures (CL) is trading higher above $120 as investors expect a report of low US oil stocks due to the expected rise in demand in the upcoming driving season.

“The oil market is expected to remain tight as the supply side will continue to tell a story of low inventories. Crude oil inventories will likely post more draws as driving season and vacationing heats up,” said OANDA analyst Edward Moya.

According to JP Morgan analysts, Russia has cut about 500,000 to 700,000 barrels of oil product exports per day as marketing fuel has become harder than marketing crude oil. They pointed out that the shortage of clean products will only worsen as demand for transport fuels goes up during summer unless new Middle East capacity comes online faster than expected or China lifts its products export caps.

On Tuesday, China added its first batch of product export quotas to reduce high inventories caused by the pandemic and poor demand. Despite these additions, their volumes are still lower than last year.

“We do not see a meaningful impact to ease the current diesel tightness but will watch for the start-up progress of new refiners like Petronas RAPID and Kuwait AL-Zour,” said Oscar Yee, a Citi analyst.

Higher crude oil prices will only fuel recession fears as the cost of living increases, and this might happen if supply fails to meet rising demand.

Investors will be paying attention to the US crude oil inventories, released later today.

Crude Oil Futures technical analysis: RSI showing weakness

Crude oil futures (CL) 4-hour chart
Crude oil futures (CL) 4-hour chart

Looking at the 4-hour chart, we see the price of CL struggling to break above the 120.00 critical psychological level. At the same time, RSI shows a bearish divergence that points to a possible weakness in the bullish trend.

If we can get a break above 120.00, bulls would post the next high at around 122.00 before the price can push lower. However, if bulls cannot break above the 120.00 level, the price may break below the 30-SMA.