Crude Oil Commentary – Friday, February 2

Crude Correction DeepensFollowing a move above the December highs last week, oil prices have turned sharply lower this week with crude futures now down around 7% from YTD highs. The sell-off comes as OPEC+ this week held its production quotas unchanged. There had been speculation of a potential further decrease in production levels suggesting some market disappointment. However, the group did note that adherence levels within the cartel and allies had been high. However, with US crude and shale production remaining at record levels, OPEC+’s efforts are being diluted. US Crude Stores JumpData earlier in the week showed that commercial crude stores in the US swung back into a surplus last week at +1.2 million barrels. This comes on the back of a string of inventory declines in prior weeks with the week before posting a 9.5-million-barrel draw. With production outstripping demand in the US, prices look vulnerable to further downside near-term. Middle East ImpactAnother key element to monitor here is the situation in the Middle East. On the back of the drone strike on US soldiers in Jordan, fears of US retaliation sent oil prices higher. However, with the US so far refraining from any such response, oil prices have cooled. The absence of any further conflict in the Red Sea has also weighed on price this week. Given how volatile the situation remains in the Middle East however, oil prices will stay vulnerable to upside risks on any headlines linked to fresh violence in the region. Technical Views CrudeThe market is turning lower within the corrective bull channel, capped by resistance at 77.64 for now. 72.61 and the bull channel lows will be the next key support to note with bulls needing to defend the area to maintain the recent bull move. Below there, the market is open to a decline down to 66.79 next. (Click on image to enlarge) More By This Author:US Market Commentary – Friday, Feb. 2U.K. Market Commentary – Thursday, Feb. 1US Market Commentary – Thursday, Feb. 1