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Call Options Suggested As Oil Rallies Despite Disappointing U.S Inventories -

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Jun, 23rd 11:59

Although West Texas Intermediate slumped on Wednesday after a smaller-than-expected U.S inventory draw-down, the market has trimmed the loss today and is currently traded at 49.46.

On Wednesday (22/6), according to data from the Energy Information Administration, U.S. crude stockpiles fell by 0.9 million barrels in the week ended June 17, lower than the estimated drop of 1.3 million barrels. This statistics remained the same for the week ended on June 10.

Moreover, data from energy services company Baker Hughes indicated that the U.S. drillers added nine oil-rigs during the reported week, bringing the total rig count to 337 units. This represented the third consecutive increase in the number of U.S oil-rigs. These figures imply sufficient supply for oil in the U.S, and may trigger investors’ fears over the return of a global oil glut.

In the past weeks, crude oil prices have fluctuated amid turmoil in global markets as opinion polls continue to point to a very close vote result and uncertainty over Britain’s continued membership of the European Union after today’s referendum. Nevertheless, in the long run, the oil price could soon reverse any current weakness, thanks to a weaker dollar and decreasing oil supply from OPEC producers.

According to the latest “Joint Organizations Data Initiative” report published on 20th  of June, oil exports from Saudi Arabia suffered a monthly decrease of 100,000 barrels per day to 7.44 million barrels a day in April – the lowest since October 2015. Furthermore, OPEC members Iraq and Kuwait also reported a decline in oil exports. Venezuela’s oil production is reported to have fallen 120,000 barrels a day last month amid outages. Barclays expects Venezuela’s output to drop by at least 300,000 barrels a day over the course of this year, to end the year around 2.1 million barrels a day

In addition, late on Tuesday (21/6), FED chair Janet Yellen clarified before the Senate Banking Committee that Fed’s benchmark overnight interest rate would remain low for some time, especially amid a global chaotic economy. Her comments virtually ruled out a July rate hike, which contributed to drag down the greenback. Since the US dollar and demand for dollar-denominated oil among holders of other currencies move in opposite directions, the waning greenback could lead to a rise in the demand for oil.

Markets are currently focussed solely on the outcome of the U.K. referendum on European Union membership.

wti d1

Fig. WTI D1 Technical Chart

On the daily chart, RSI (14) is around 53.6262, indicating that no trend has been confirmed. The trend indicator has suggested a long position since February 24 via a green arrow under the price chart. The commodity price is anticipated to move up slightly for the rest of the day awaiting clues from the British referendum. The level 0.0% of Fibonacci retracement is anticipated to be tested.

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