U.S. West Texas Intermediate and international-benchmark Brent crude oil futures went on a volatile, two-sided trade last week before posting a potentially bearish closing price reversal top. The chart pattern won’t change the trend to down, but it could trigger the start of a 2 to 3 week correction.
The trading action could just be a sign that the selling is greater-than-the-buying because prices got two expensive after speculators ran up the market due to worries over a supply disruption caused by Russia’s invasion of Ukraine.
Last week, May WTI crude oil futures settled at $106.30, down $5.81 or -5.18% and June Brent crude oil finished at $109.10, up $5.24 or 4.80%. The United States Oil Fund ETF (USO) closed last week at $76.40, down $3.06 or -3.85%.
Crude prices soared last week to their highest levels since 2008 as traders assessed the damage to global supply from Russia’s invasion of Ukraine. Also helping to spike prices higher was the announcement of a U.S. ban on Russian oil and oil products. However, they pulled back sharply throughout the week as some producing countries signaled they may boost supply.
Adding to the market’s volatility was the uncertainty over the U.S. – Iran nuclear deal. Early in the week, traders were convinced the deal would be signed. On Friday, however, supply concerns grew when talks to revive the 2015 deal faced the threat of collapse after a last –minute Russian demand forced world powers to pause negotiations.
Russia Having Trouble Selling Its Oil as Countries, Companies Back Away from Deals
Reuters reported last week that Russia is starting to face problems selling its crude oil and oil products as Western bans and financial sanctions over its invasion of Ukraine begin to bite.
The United States imposed a wide ban on Russian oil and gas imports, while Britain said it would stop buying its oil and oil products by the end of 2022.
Meanwhile, the European Union, which relies on Russia for 40% of the block’s collective gas needs and about 27% of oil imports, is discussing how to phase out the use of Russian fossil fuels.
US Drillers Add Oil and Gas Rigs for Ninth Time in 10 Weeks – Baker Hughes
U.S. energy firms last week added oil and natural gas rigs for the ninth time in 10 weeks after Russia’s invasion of Ukraine drove crude prices to their highest level since 2008.
The oil and gas rig count, an early indicator of future output, rose 13 to 663 in the week to March 11, its highest level since April 2020, energy services firm Baker Hughes Company said in its closely followed report on Friday.
Baker Hughes said that puts the total rig count up 261 rigs, or 65%, over this time last year.
Although last week’s sell-off may have been fueled by thoughts of additional supply, prices could stabilize or become rangebound because the current supply gaps are unlikely to be filled by extra output from members of OPEC and allies, together called OPEC , given Russia is part of the grouping.
Additionally, some OPEC producers, including Angola and Nigeria, have struggled to meet production targets, limiting the group’s ability to offset Russian supply losses.
This week, the focus for traders will be on market reports from the International Energy Administration (IEA) and the Organization of the Petroleum Exporting Countries (OPEC). Both have indicated the market should be oversupplied later this year, but this assessment likely changed after sanctions were placed on Russian crude oil exports.
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This article was originally posted on FX Empire