With the Saudis proposing a change in the dates of the OPEC + alliance online summit, the shine seems to have been taken off crude oil prices despite the drop in crude oil inventories. The latest crude oil inventories report by the Energy Information Administration (EIA) shows that crude oil stockpiles dropped by 2.1 million barrels in the week ended May 30, 2020. This is far below the projected rise of 3.0 million barrels and also a massive drop from the 7.9million barrels surplus on the crude oil inventories the previous week.
The crude oil price has been on a fantastic run since May 1 when the 9.7million barrels per day output cut kicked in. However, the next impetus for price advance above the elusive $40 mark will have to come from the OPEC + meeting. This may have to wait for another two weeks at best.
The run of crude oil price of the Brent benchmark towards $40 has stalled. Brent crude is trading at 39.11, after having touched off intraday highs at 40.51. It is now pulling back towards the 38.56 price level which has acted as a previous resistance on March 11 and June 1 2020.
Price needs to close above this level to confirm the breakout, as a previous penetration close was achieved yesterday. If this is attained, the crude oil price may have another opportunity to make a run towards 41.43. However, support for this move has to come from the OPEC + alliance. Markets are hoping that an extension of the production cuts till September will be the decision, and this is what will provide a further prop for oil prices.
On the flip side, we could see profit-taking which could send the asset below 39.58. If this is the case, crude oil price could dip as far as 31.69 or even 28.38, depending on the strength of the decline. Of course, if the OPEC + meeting fails to produce the expected extensions to output cuts, this could have further bearish implications for Brent crude.