U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading slightly higher during the early session after giving back most of its earlier gains. Prices were supported early in the session by follow-through buying related to last week’s technical reversal to the upside. That move was fueled by reports that Saudi Arabia said OPEC and its allies, including Russia, were likely to keep withholding supplies. Short-covering in response to an immigration deal between the United States and Mexico also contributed to the early strength.
Prices are likely retreating from the highs of the early session because of the news from China that May crude oil imports dropped from a record high in April.
Early Monday, China reported that its crude oil imports slipped 8% in May from an all-time peak hit the month before as the world’s top importer of the commodity curbed shipments from Iran amid tightening U.S. sanctions on that rogue nation.
According to the General Administration of Customs, China’s crude imports dropped to 40.23 million tonnes in May from 43.73 million tonnes in April. That equates to 9.47 million barrels per day (bpd), down 11 percent from April. Reuters reported that the numbers reflect pressure from lower imports from Iran and as several major state refineries were shut for regular overhauls.
The report from China is likely to have a short-term impact on prices since it was related to the U.S. sanctions on Iran rather than the escalation of the U.S.-China trade dispute. Today, traders are likely to keep the focus on any news regarding the extension of the agreement between OPEC and its allies to cut production, trim the excess oil supply and stabilize prices.
This plan has helped keep prices afloat since January 1. The new deal will likely extend the plan from July 1 until the end of the year. This is being read as a positive for prices amid major concerns over future demand due to a weakening U.S. and global economy.
Furthermore, prices are being pressured by rising U.S. stockpiles due to low demand and accelerating production.
We could see a rangebound trade today due to the lack of fresh economic news, however, last week’s potentially bullish chart pattern may attract some speculative buyers. If there are no major outside events to drive prices lower, the direction of the market this week will be primarily determined by the American Petroleum Institute report on Tuesday, and Wednesday’s U.S. Energy Information Administration weekly inventories report.
This article was originally posted on FX Empire
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