The rally continues for petroleum prices, after Saudi Arabia and Russia released a joint statement announcing plans to extend production cuts for 9 months. Prices are up more than 3% for all of the major futures contracts, which now stand 12-13% above where they bottomed out during the wild overnight session May 5th.
With the majority of the April sell-off having been wiped out in the past 7 trading days, technical studies are quickly moving back into bullish territory. One potentially pivotal level this week for will be the 61.8% retracement of the April drop that comes in just below $50. If WTI can’t break that mark, it may act as an anchor on refined products and Brent, which appear to have more room to run higher on the charts.
The net long positions held by money managers in WTI and Brent was slashed for a third straight week, driven almost entirely by new short positions entering the market, rather than long liquidation. Those new speculative bets on lower prices came just in time for the market to rally by 10%, meaning some of today’s surge higher may be forced short covering, and could continue to propel prices higher near term.
9 more oil rigs were put to work last week according to the Baker Hughes weekly rig count, which keeps pace with the increases we’ve seen just about every week so far this year. It seems like a safe bet to say that the companies that have put 183 rigs back online in the past 19 weeks are just fine with today’s announcements that has sent prices 3% higher.