Chart of the day: The chop in WTI continues...The chop in WTI continues but bullish factors outweigh the negatives.
Oil prices has been through rough couple of sessions after suffering a more than 10% drop on the 18 of March. The biggest "challenge" to the bull case for oil has been the rise in virus cases, more recently from India which is the world's third largest oil importer.
However, the fact that Saudi Arabia was confident enough to raise supply going into June is a positive factor. Aramco (state owned oil company) receives orders from global refiners two months in advance.
Thus, if they were comfortable to raise output in May and June, it means they are comfortable with what they are seeing under the hood in terms of demand.
Apart from that, despite the rise in cases in certain parts of the world, the global vaccination roll out is gathering a lot of pace with close to 700 million vaccinations administered. If we can keep up this pace, the reopening narrative that drove a lot of oil demand expectations is still intact.
Inflation is the other point to consider. Commodities, and more specifically oil, shares a positive correlation to inflation expectations. Thus, the rise in inflation expectations, with the anticipation of higher actual inflation going into Q2's easy base effects is another positive factor for commodities.
Techically, the support are between $57 and $59 has acted as a very important barometer, as long as that holds, and as long as OVX (oil volatility index) continues its recent downward trending move, the short term and med term bias for WTI remains tilted higher.
