Oil prices fell around 1% and back towards the $46 level after the OPEC monthly report showed oil production across OPEC rose by about 336,100 barrels per day to 32.1 million bpd in May. The increases stemmed from Libya, Nigeria and Iraq. In May, OPEC and some non-OPEC members agreed to extend its six-month deal to cap output into 2018.
Price tentatively rebounded ahead of the American Petroleum Institute report, but fell back to session lows after reporting crude stocks increased by a surprising 2.8 million barrels for the week to June 9, much higher the expected 2.7 million-barrel drawdown forecast. If the API data is confirmed by the official EIA figures due Wednesday morning, we could see oil remain under pressure.
Price action on the US oil daily chart shows that in early May key support came from a bullish ABCD pattern. Point D was confirmed with the 141.4% Fibonacci expansion level of the B to C move. Price is now tentatively trading around both the 200- and 50-day SMA(s). Price was unable to rise above the $52 level and has since fallen back below all three key SMA(s). If we continue to see bearish momentum, further pressure could target the 43.50 to 44.00 zone. Major resistance would come from the 200-day SMA, which currently trades at the 49.60 level.
The trade: Sell US oil at $50.50, with a stop loss at $51.50 and take profit at $47.50 The risk/reward ratio is 1:3