Nothing much to add this morning. Barring any unexpected events, it seems we are becoming progressively more neutral until the the terms of the renewal of the OPEC/Non-OPEC are settled - although rumours and opinions on it will no doubt throw the price around from day to day. However, we do have the EIA Crude oil stocks release later, which is currently a key issue, and any strong divergence from expectations (which seems to be more the rule than the exception in oil!) will no doubt produce a strong reaction.
The key “problem” is not just whether there is an extension or not, nor what the terms of the extension are, but whether the extension will have any impact on prices anyway! As long as it remains feasible that the US and other non-agreement countries can increase production to partially counter the reductions by the OPEC/NOPEC group, then the effect of any extension is diluted, the global inventories glut remains, and OPEC market share is reduced and taken up by the non-agreement countries.
In the meantime, estimates of future global demand have been weakening due to lower economic growth estimates and increased impact of renewable energy sources, which raises a cloud over the extent of possible price increases anyway.
But the bulls will retaliate with claims that current investment in new conventional production resources are too low to guarantee sufficient supplies in the longer term and that shale production is too small and too short term to meet future demands on its own. In addition, the oil companies also want good profits and will quickly turn off production if prices drop too low. The current estimates are that breakeven costs for US shale oil are, on average, around $30 per barrel (which is considerably lower than for many producers globally) - and then we need a healthy profit on top of that.
There has been a noticeable tendency for active buying to appear whenever price has dropped much below where we are now, as we saw last Thursday. Are we perhaps finding value around these levels, afterall? Maybe, but while the longer term charts are still negative to neutral it is maybe a bit premature to actually trade on that assumption! I am very much in a stalled, neutral, consolidation mentality and a few day trades are enough to keep me happy right now - at least until the EIA release later today…
So all in all, there are sufficient arguments on either side to guarantee plenty of action in Crude trading.
If we take a longer period look at the 4-Hour chart we can see the move that started around mid April and how it is now stalling. But the best one can say is that it is now neutral and best to trade short term intraday and wait for signals for the start of the next major move - which could be either way from here!