The August light sweet crude oil futures contract staged a key reversal in the middle of last week as after making new highs since the June 21 low, it then switched directions and closed below the previous day’s low, explains Marc Chandler, Global Head of Currency Strategy at BBH.
“News that US oil (and gasoline) inventories fell, with the former being at the lows for the year, encouraged some consolidation. However, US production remains strong, with Russia demurring, OPEC may have reached of its strategy what succeeded in extending what was initially thought to be a six-month operation. Also, Libyan and Nigerian output, which is not bound by the OPEC quotas, have managed to ramp up output. The August contract briefly fell below support near $44.00 before the weekend. The technical indicators are not generating a strong signal presently, but our bias is lower, with a test on the year’s low set last month near $42 likely.”