Oil markets yesterday were in a state of being busy going nowhere. On one hand, there was the comments coming out of the OPEC+ pre-meeting in Jeddah prior to the OPEC convention next month - and on the other hand, analysing the possible impact of the US restrictions on US companies dealing with Huawei, namely Android and several major mobile phone components.
It seems to me that the overall outcome of the Jeddah meeting was confirmation that OPEC is driving more for price stability than any major price increase. Whereas they are looking at the possibility of relieving the current production cut agreement of 1.2mb and increasing supply, they will only do this to address imbalance in supply /demand through outages or increased demand. But, at the same time, they are closely monitoring stock levels and will not allow any significant increase to again occur:
"Speaking in Jeddah ahead of a ministerial panel gathering on Sunday of top OPEC and non-OPEC producers, including Saudi Arabia and Russia, Falih told Reuters OPEC will not decide on output until late June when the group is due to meet next.
“I am not sure there is a supply shortage, but we will look at the (market) analysis. We will definitely be responsive and the market will be supplied,” Falih said, when asked whether an increase in output was on the table due to oil shortage concerns.""
So whilst oil prices should remain well-supported (and the long and short-term charts are supporting that view) it is hard to visualise any major rally with OPEC eager to increase supply when and if possible and with the current fears over the global trade situation.
In the broader picture oil prices and the SP500 are showing this correlation. And so, excluding intraday differences, we can justifiably assume that in the wider sense, oil markets will be more focused on the stock markets than on, for example, the oil supply situation from Iran and Venezuela:
Daily chart SP500 v. USOil since end 2018:
I have read several articles expressing the suspicion that the US is stringing out its trade negotiations with China in order to do its thing in Venezuela and Iran without the danger of excessive peaks in oil prices, which would be politically damaging at home. Coincidence or astute scheming? Well, I certainly don’t know, but in an era of cyber wars, trade wars and proxy wars, nothing is any more too incredulous to believe!
So where does that leave trading? I still don’t see any signs of a return to the long term trends in the early months of this year in SP500 or Oil, neither in the fundamentals nor in the charts, so I am still trading with a short term perspective of mainly buying dips and taking profits around the 50 pip level - bread and butter stuff.
Regarding pivots, I am intrigued to see that the current weekly pivot S/R are also reflecting and coinciding with some notable S/R levels on the oil chart (spooky?) :
