Owing to a supply glut, oil price declined from $115 in June 2014 which further deepened after the OPEC dropped its policy of cutting output in order to back prices.
A supply report released by the US Government highlighted a dip in crude inventories for a third week, as the US crude stocks fell to 482.2 million barrels, according to EIA data. Supplies remain near the highest level since 1930, based on monthly records dating back to 1920, and are 100 million barrels above the five-year average for this time of the year.
Stability of oil flows from the Organization of the Petroleum Exporting Countries (OPEC) although the second-largest producer Iraq created uncertainty due to repeated attacks of the Islamic State militants to the city of Ramadi.
OPEC, which supplies about 40 per cent of the world’s crude, pumped 31.3 million barrels a day in April, exceeding its collective output quota of 30 million barrels for a 11th month and is schedule to meet in Vienna on June 5 to discuss its production target.
Prices however got some check after Chinese factory activity contracted for a third month, according to a private survey that further highlighted a decline oil demand could dip.
Since the beginning of the year oil prices rose more than 13.95% and a double bottom seems to be confirmed on a weekly time-frame. Last week crude oil initially rose but found enough selling pressure to give all of its gains and closed in the red below the open of the week, in a narrow range week. The commodity is still in a recovery phase and the stochastic is showing an overbought market but even with the commodity well into overbought territory, we should not fight the strong upward trend just yet.
Expecting upward move to a key level at 65.70 on a bounce from a key level at 54.42 (scenario 1).
LCrude is a CFD written over Light Crude futures.