May is normally the strongest month for crude oil but it certainly hasn’t started out that way.
WTI crude fell another 57-cents today to bring the weekly decline to $5.50 in five straight days of selling. The weekly chart is set to post the lowest close since the week ending March 8 while the daily chart has traced out a head-and-shoulders top.
WTI crude daily
The measured target of the move is $74.
Some of the geopolitical risks are coming out of oil with reports that a ceasefire in Gaza is possible this weekend. There’s also a report about a security deal between the US and Saudi Arabia. You have to wonder if part of that deal would involve bringing back some barrels ahead of the US election.
Talk has begun to circulate about the June 1 OPEC+ decision on extending quotas beyond the end of June. The consenus is for no change and that’s what the early leaks show but it’s still very early and OPEC is tough to predict. The chance of more barrels will lead to some position squaring among longs, which have gotten a bit crowded on the way up.
Finally, economic growth signals are mixed. Today’s non-farm payrolls data and softer ISM services show the US could be slowing but at the same time there are mounting signs that China’s economy is picking up.