Looking to the Futures

West Texas Intermediate settled higher in Wednesday's trading, overcoming a price decline from triggered by the International Energy Agency's (IEA) cut to its 2024 demand forecast. Light Sweet Crude Oil futures for June, /CLM24, settled at $78.63 per barrel up $0.61 from previous settlement. July crude, /CLN24, settled at $78.16 per barrel, up $0.51 from previous settlement. 
 

The IEA released it May report on Wednesday which it lowered its 2024 oil demand forecast. The IEA now forecasts oil demand to rise by an estimate 1.1 million barrels per day, down 140,000 barrels per day from its April forecast. The agency projects global oil supplies to increase to a record 102.7 million barrels per day. 
 

The US Energy Information Administration (EIA) released its weekly petroleum report on Wednesday. Crude inventories fell by 2.5 million barrels; gasoline inventories fell by 0.2 million barrels; distillate inventories were unchanged but were reported as "slightly decreased". Crude inventories are 4% below the five-year average for this time. 
 

Last week, the Israeli military took Rafah's border crossing with Egypt a move that was against the wishes of the Biden Administration. Because of the Israeli assault the US has paused arms shipments to Israel. The military action by Israel against the Gaza Strip was the result of a terrorist attack conducted by Hamas on October 7th, 2023, killing 1,143 people. Traders are keeping a close eye on this conflict as it has the potential to expand into the surrounding regions disrupting global oil supplies and trade. 
 

The conflict has already risen tensions in the region with Iran and Houthi rebels. Last month Israel attacked an Iranian consulate in Syria killing several Iranian military commanders. This led to an unsuccessful rocket response by Iran and that is where it ended. Houthi rebels in Yemen continue to attack shipping lanes in the Red Sea which has caused shipping carriers to divert around the southern tip of Africa drastically increasing shipping times. 
 

OPEC+ members seem to once again to be fractured in the organizations decision to cut production of oil. Iraq's Oil Minister Hayyan Abdul Ghani stated, "I think Iraq has cut enough and will not agree to any other cut". This will certainly lead to disagreements when the group meets on June 1st. At the beginning of the year, Angola left OPEC due to production disagreements. Saudi Arabia has continued with their voluntary production cuts of 2 million barrels per day expected to last through the end of June. 
 

Light Sweet Crude Oil futures for June, /CLM24, settled at $78.63 per barrel up $0.61 from previous settlement. The June contract is 6 days from last trade date and traders have started to role to the July contracts. July crude, /CLN24, settled at $78.16 per barrel, up $0.51 from previous settlement. 
 

On the continuous one-day chart, oil is currently trading below the 50- and 200-day simple moving averages which is bearish. The 50-day SMA is at $81.63 and the 200-day SMA is at 79.58.
 

The 14-day RSI is 40.784% and just above the oversold threshold of 30%. RSI has begun to turn up indicating a possible bullish reversal from the recent price action. 
 

The Directional Movement Index is negative. ADX (white) is elevated which indicates a strength in the current trend. Positive DI (green) is low and pointing lower giving the indication that a move up would less likely, but this could easily be driven by a fundamental change. The Negative DI (red) is high and pointing higher indicating the current trend on the daily chart. 
 

/CL has been trading along the 77 – 79 level which has historically been a support/resistance level as seen on the chart. 
 

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

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