Crude oil price has weakened over last few days as risk aversion hits the global market. Traders and investors either buy some form of insurance or go for positions scaling ahead of the referendum in the UK.

WTI is currently trading at $47.8 per barrel and Brent at $1.1 per barrel premium.

Key factors at play in Crude market –

  • Goldman Sachs has called that crude recovery is over and price may once again drop lower.
  • OPEC members met in Vienna and maintained status quo in terms of production. However, Saudi Arabia’s new oil minister’s call for rebuilding OPEC and its cooperation gained lots of attraction.
  • Canada’s production is under recovery after wild-fire shut down 1.8 million barrels/day.
  • Nigeria and Venezuela still facing troubles with production and outages. Militants are attacking Nigerian pipelines.
  • U.S. oil production has dropped to 8.74 million barrels/day and likely to drop further.
  • Both OPEC and IEA in their oil market reports showed optimism towards oil market and forecasted that the market will reach balance in the second half of the year.
  • Major supply increase is taking place from the Middle East. Iran’s output rose 80,000 barrels/day in May to 3.84 million barrels/day. Saudi Arabia is expected to increase production to 11 million barrels/day.
  • India has emerged as the biggest incremental crude buyer this year.
  • American Petroleum Institute’s (API) weekly report showed inventory declined by 1.518 million barrels.

Today’s inventory report from US Energy Information Administration (EIA), to be released at 14:30 GMT.

Chart courtesy investing.com

Trade idea –

  • In the short-run, we expect WTI crude prices to dip further $42/barrel in the wake of risk aversion but it is still can’t be said that current rally is over. Price rise to $60/barrel, very much conceivable.

The material has been provided by InstaForex Company – www.instaforex.com