Despite what looked to be a rally to end the week, the oil patch traded mixed mid-morning on profit-taking after a bullish trading week.
Crude oil has traded higher on the week, driven by the large, yet seasonal draw in crude oil stockpiles reported on Wednesday. The June WTI contract traded as low as $45.53/bbl on Tuesday and as high as $48.22/bbl on Thursday. The contract ran into technical resistance in the low $48 range and failed to press through, which can explain the downward turn mid-morning. The down day today also comes amidst the dollar weakening, which is surprising, yet indicative that the bulls are tired this week after causing crude to rise over $1.50/bbl since last Friday. We currently trade down $0.10 at $47.73/bbl on the day.
As far as which way we may go from here, there seems to be more bullish risks hitting the news headlines. Bank of America Merrill Lynch recently forecasted WTI to average $52/bbl in 2017 and $53/bbl in 2018. For the near term, Jefferies, an investment bank, reminds us that the crude oil “net length is at its lowest level since November 2016.” This means that a quick and fierce rally is possible if sparked by a major headline. Let’s not forget about the OPEC meeting in Vienna on May 25th. With less than two weeks to go, expect some volatility as traders position themselves in case of a sharp price reaction to the news.
June RBOB trades higher by $0.0136 to $1.5758/gallon and June ULSD trades higher by $0.0031 to $1.4930/gallon.