Oil tanked on Friday ahead of an OPEC meeting today, but perversely Venezuela may end up doing what OPEC can’t.
Crude oil prices ran into a brick wall on Friday night with both contracts falling over 2.0% in late New York trading. The move itself was driven more by technical factors rather than any one piece of news, with traders squaring up ahead of the weekend and possibly ahead of OPEC/Non-OPEC’s technical meeting in St. Petersburg today. This meeting should not provide any surprises in itself unless they announce that compliance has fallen or adjust their market rebalancing forecasts.
From a technical perspective however, Friday’s price action was not constructive, with Brent spot failing ahead of its 100-day moving average at 50.55 and WTI’s at 47.80. These two levels will now become key pivot areas as we move into a packed data week.
Looming on the horizon for oil traders is the 30th of July and Venezuela. This is the date the Venezuela intends to enact constitutional amendments the United States deems illegal and over which it will impose immediate sanctions. This has the potential to finally send Venezuela into bankruptcy, torpedoing their oil exports. This would also impact U.S refiners already suffering from reduced heavy oil exports from Saudi Arabia. With U.S. refiners importing approximately 900,000 barrels a day from Venezuela, the sanctions could potentially send crude prices higher.
Looking to today’s Asian session, Brent spot should open around 48.00 with ascending trend line support at 47.25 with resistance far away at 49.55.
WTI spot trades slightly higher from Friday at 45.50 with ascending trending support at 44.80 and resistance distantly at 47.00.
All eyes will now turn to the St. Petersburg meeting this afternoon.