Crude oil prices continue to struggle to the upside as the first snapshot of fundamentals this week--the American Petroleum Institute (API) inventory report--was mostly bearish. The more widely followed Energy Information Administration (EIA) oil inventory report is due out at 10:30 a.m. EST this morning which is expected to show an across-the-board build in the complex. In addition, mid-afternoon today the U.S. Central bank will announce the outcome of its Federal Open Market Committee (FOMC) meeting with the market anxiously looking for any signs as to its upcoming plans for short term interest rates.
From a technical perspective the energy complex remains in a downside correction with the peak of the upside move that began in mid-March still in place for about the last week or so as the pricing formation is now more of a consolidation pattern with a drifting to the downside.
The current fundamentals remain bearish and at least for the last week or so the perception that the fundamentals will improve and the worst is over has not been enough to offset the reality of the huge overhang of crude oil sitting in inventory at the moment. An overhang that will have to be worked off before supply and demand balances can truly move back into a balanced position.
The big question that the market will begin to focus on is what will be the outcome of the June OPEC meeting? Will they or will they not cut production at this meet? According to Bloomberg technical specialists from Russia, Mexico and Oman will confer with their OPEC counterparts May 12 and May 13, said two people who asked not to be identified because the discussions are private. The meeting was suggested by Venezuela, which has urged the 12-member group to revive prices by reducing output. So far the orchestrator of the market share strategy, Saudi Arabia, has not given any signals that they intend to cut production.