Crude oil prices continued to tumble on Monday, but volume was light due to the U.S. Memorial Day holiday, and the U.K. Bank holiday. Prices hit support levels and are holding down 2.25%.. This is the fifth consecutive session of declines from the 42-month high that was seen last Tuesday at $72.83. The low today the decline from the trend peak was 9.7%. Both Russia and Saudi Arabia indicated late last week that they are disposed to opening the supply spigots following recent steep gains and a stabilization in global oil inventories, which have now returned to near long-term average levels from the unusually bloated levels of recent years.
Crude oil prices continued to drop but appear to have stabilized near support at an upward sloping trend line that comes in near 65.70. Resistance is seen near the 10-day moving average at 70.70. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. Prices are oversold as the fast stochastic is printing a reading of 12, below the oversold trigger level of 20 and could foreshadow a correction.
U.S. rig count data of late Friday also showed that U.S. supply will continue to grow. These developments have swamped out concerns about the impact of pending U.S. sanctions on Iran exports, and the precipitous drop in Venezuelan output. WTI prices are still up 10.6% on the year-to-date. The Baker-Hughes weekly oil rig count showed a 15 rig rise to 859 up, and up 137 year over year.
Distillate Demand Could Soar
Demand for distillates will move higher ahead of the starting date for new regulations for international maritime fuel. The International Maritime Organization (IMO) has set January 1, 2020, as the starting date from which only low-sulfur fuel oil will be allowed to be used for ships. The global sulfur limit on fuel oil will be set at 0.50% mass/mass in 2020, a significant cut from the 3.5% global limit currently in place. The regulation will send demand for middle distillates such as diesel and marine gasoil soaring, and refiners will have to shift some of the products they will be processing from crude oil.
This article was originally posted on FX Empire
More From FXEMPIRE:
- Euro Sellers Act Quickly as Alarm Bells Ring in Italy
- Market Snapshot – Euro Continues to Sell-Off
- Price of Gold Fundamental Daily Forecast – Traders Acting Like US-North Korea Meeting is Done Deal
- The EUR/USD Continued to Tumble as Political Unrest is Percolating
- Crude Oil Drops to Support Following Statements from Russia and Saudi Arabia
- The Complete Cryptocurrency Guide