Although yesterday’s price action was very erratic the range on the day was small and the close pretty much unchanged on the day. This new range which is loosely and very broadly around 51.50 to 50.50 seems again to be forming a stalling zone for both bulls and bears.
The flavour of the moment seems to be back to the oil glut and OPEC/NOPEC’s chances of reducing it back to the 5-year average and raising prices towards the $60-70 range. The bulls are banking on an extension to the current agreement that ends in June to the end of the year (meeting on May 25). Whereas the bears are focusing on the record increases in production in the US and increases among other countries not participating in the Non-OPEC group, which they see as countering the impact of OPEC-led cuts.
The simple answer is: time will tell!
One comment I saw seems to underpin the complexity of this issue of balance between supply and demand and whether prices rise as a consequence of balance or not:
[I]"The latest IEA Oil Market Report stated, “It can be argued confidently that the market is already very close to balance.” What does that mean?
Market balance means that production and consumption are approximately equal. That is an important first step for a market in which production has exceeded consumption for most of the last 3 years but it hardly means that $70 oil prices are around the corner.
Market balance must be expanded to be useful: production is not the same as supply, and consumption is not the same as demand. Supply is production plus inventory. Demand is the quantity of oil the market is willing to buy at a certain price–it may be either more or less than production.
[/I]
Daily chart shows the current zone. We are struggling at the bottom of this and there is clearly still vulnerability to further falls (as voiced by some senior people in the oil industry):
The 1H chart showing flattening but still no sign of an upward turn in prices:
…and an interesting “spring” picture from Reuters that has nothing to do with Crude Oil at all (unless we extend content to include global warming issues):
Residents view the first iceberg of the season as it passes the South Shore, also known as “Iceberg Alley”, near Ferryland Newfoundland, Canada April 16, 2017. REUTERS/Jody Martin