Brent Ticks Up On Mixed Data Ahead Of OPEC Meeting

Brent crude oil has moved up slightly, and is currently trading at $50.09 per barrel on Thursday. Investors and traders are taking a cautious tone right now ahead of the result from the OPEC meeting in Vienna, which is widely expected to fail to reach any restrictions on the oil output.

Total OPEC oil production has remained flat this year, currently steady at 32.5 million barrels per day (bpd), due to unexpected attacks on oil infrastructure in Nigeria, power outages and payment problems in Venezuela along with chaos in Libya, although Iran has ramped up its output extensively.

Members of OPEC want to protect their market share, as Iran is back into the markets, after years of sanctions. Iran’s oil minister has rejected suggestions of an oil supply cap at the OPEC meeting, stating that Iran was producing 3.8 million barrels per day and would soon boost production to 4 million barrels a day following the lifting of sanctions in January.

Meanwhile, Saudi Arabia, the key member of OPEC, has said that it might join the deal, in case Iran accepts the suggestion of putting a limit to its oil supply. Libyan and Nigerian oil ministers have hinted at their attempts to lift up oil production to its full capacity. The oil price is on the edge of crashing, after weeks of rising, following no agreement at the OPEC meeting.

Manufacturing activity in China – one of the world’s largest consumers of crude oil, shows signs of steadying. The country’s manufacturing purchasing managers index (PMI) came in at 50.1 in May, beating the estimate of 50.0. However, Chinese factory activity remained weak amid soft demand at home and abroad, suggesting the country is still struggling to regain traction. This poses a threat to the demand for oil in the world’s second-largest economy, which could adversely affect the oil price.

Data from the US on Wednesday reported that manufacturing PMI rose to 51.3 in May – the third straight month of growth. This represents a significant increase from the reading in April. Additionally, according to Motor Intelligence, U.S. Total Vehicle Sales in May jumped up to 17.4 million, beating analyst expectations of 17.2 million. The positive data for the U.S economy can help advance the demand for oil and other commodities, thus helping support the crude oil market.

U.S Crude Oil Inventories are scheduled to be released today by U.S. Energy Information Administration. Total inventories are expected to fall by 2.7 million barrels in the week ending May 27, following a 4.2 million barrels decrease for the week ending May 20.

brent d1

Fig. Brent D1 Technical Chart

On the daily chart, the Brent price is moving in a narrow range between 49.70 and 50.28.

RSI hovers around 63.0913, indicating that bulls still hold the edge. Moreover, the trend indicator has signalled a long position since February 24 with the green arrow under the price chart. The commodity is anticipated to climb further. The next resistance to test is 51.45.

Trade suggestion

Buy stop at 50.39, Take profit at 51.01, Stop loss at 49.32

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