Crude did test the breakout area ($34 - $33) as we projected in our March 28 article, though not in the form that we had expected. Price went to as low as to around $34.40 a barrel on April 5, before making a U-turn to rally close to $42 a barrel in the week before the OPEC meeting in Doha take place.
So much for the drama, market opened with a gap-down on Monday, as the meeting failed, when the Saudis insisted on Iran participation; only to negate the gap and rallied close to $43 a barrel last week, after news broke that Kuwaitis oil worker decided to launch a 3 days strike. Energy Information Administration’s (EIA) report that crude stock rose lower than market expectation also help buoyed price to the 5-month high last week.
Now with the strike that is over, OPEC Secretary General Abdullah Al-Badri said that some minister may bring up the production freeze issue again in the June 2nd meeting, though it’s not in the secretariat’s agenda. Market speculation is also high that OPEC and Russia plan to meet in Moscow next month, to strike again at reaching a deal on oil output freeze, even though Russian Energy Minister Alexander Novak denied any such plan.
Looking at the futures market, risk sentiment is mixed with equities and energies being the biggest losers, each with 0.55% and 0.53% decline respectively. Bond also showed less buyers with 0.06% decline. Metals are up 0.34%, together with grains and softs that took the highest spot with 0.67% and 0.55% respectively. Nevertheless, crude large speculators have sharply increased their net long by more than 15% at 45,014 contracts to 334,175 contracts as of CoT report Tuesday last week.
Looking back at the chart, on the daily, a possible rising wedge is in formation which may signal further fall, in light of the coming FOMC meeting this Wednesday. Given current sentiment, Halal Traders decided to stand aside on this instrument until FOMC meeting clears.