Crude Prices Push Higher as Bulls Gain Momentum

Oil prices edged higher on Tuesday ahead of an Opec summit, and some market players believe the rally can continue. In London, Brent crude for August delivery rose 8¢ to close at $74.76 per barrel. However, the underlying dated Brent contract is above $75/bbl. In New York, August West Texas Intermediate (WTI) on Nymex ended the session up 7¢ at $72.98/bbl. Crude came under pressure late in the session in close correlation with the dollar’s rising strength, but still managed to close in the black. Some sources said oil is in something of a holding pattern ahead of Thursday’s Opec-plus summit, where the bloc and its allies will discuss further easing production quotas and bringing more supply to market (IOD Jun.29'21). Market players said the current consensus is that the group will add 500,000-1 million barrels per day in supply. From a technical perspective, the outlook remains skewed to the upside despite a long rally. Brian LaRose of Icap said several key support levels must be breached to make the case for a more structural pullback in prices -- oil must trade below the 22-day moving average, and Brent must ultimately drop below $70/bbl. “[We are] forced to treat any congestion or weakness as corrective in nature until or unless these levels can be broken,” he noted. For now, Brent is trading closer to resistance around $75.50/bbl than its nearest key support just north of $73/bbl, Icap’s analysis shows. Bulls Roll Others said that anticipation of a tight market in the second half of the year amid vaccine rollouts and continued upstream discipline will maintain support of bullish trading action. “Embarking on what many anticipate to be a barn-burning summer for oil demand, the fundamental market setup is one that has become increasingly unfriendly to short sellers,” said Mike Tran of RBC Capital Markets. In addition, traders seem to be shrugging off the effects of renewed spread of the Covid-19 pandemic, particularly its Delta variant. New lockdown measures are being imposed in parts of Australia and Europe, and cases have been reported in the US as well. Despite this, the outlook remains constructive for oil demand and prices, said Tamas Varga of oil brokerage PVM. “The narrative of the past few months has not changed: The war against the virus is being gradually won, the global economy and oil demand are recovering, oil supply is being effectively managed, therefore dips are probably viewed by ardent bulls as attractive buying opportunities,” he explained. Frans Koster, New York