Fundamentally I think crude oil is overbought at the moment due to multiple reasons. My main concern is from the corona virus as many strong economies are starting to recover, the virus is still in the expansion stage in many emerging economies. Oil is a necessary commodity for these emerging countries as their economies are built off the industrial sector, for example India, it is the 3rd largest importer of oil in the world, yet the virus is increasing rapidly everyday , where its citizens will be in lock down for the foreseeable future. Also the biggest importer- China is starting to recover and demand for oil is picking up, however there is still threats of a second wave which can disrupt demand of oil which is crucial as China's exports make up around 20% of its GDP. Furthermore there is an ongoing battle between the US and China and placing tariffs on certain Chinese exports which can lead to a fall in Chinese exports and an overall lack of demand in oil.
Also some US companies are starting to feel 'optimistic' and are increasing shale productions; EOG Resources said it plans to “accelerate” production in the second half of 2020, finding prevailing oil prices sufficient to step up drilling activity. Due to the previous reasons i still don't think its time to increase production.
Reports say there will be an OPEC meeting to be held this week, which is earlier than planned, discussing further extension on the oil production cut. Many economies failed to cut production to the extent that was required for them for the month of May. Originally it was a two month plan for this cut for the months of May and June, but reports say it could be extended due to the full compliance of some of the OPEC countries into the months of July and August. This will most likely not be fully agreed upon as Russia and other countries are keen on accelerating production.
Technically the $42 mark is a strong key level and a double fib on the monthly time frame. This may be a good area to enter short but we should be cautious as there could be some bullish news from the OPEC meeting coming up later this week
Also some US companies are starting to feel 'optimistic' and are increasing shale productions; EOG Resources said it plans to “accelerate” production in the second half of 2020, finding prevailing oil prices sufficient to step up drilling activity. Due to the previous reasons i still don't think its time to increase production.
Reports say there will be an OPEC meeting to be held this week, which is earlier than planned, discussing further extension on the oil production cut. Many economies failed to cut production to the extent that was required for them for the month of May. Originally it was a two month plan for this cut for the months of May and June, but reports say it could be extended due to the full compliance of some of the OPEC countries into the months of July and August. This will most likely not be fully agreed upon as Russia and other countries are keen on accelerating production.
Technically the $42 mark is a strong key level and a double fib on the monthly time frame. This may be a good area to enter short but we should be cautious as there could be some bullish news from the OPEC meeting coming up later this week