Crude Oil Dropped As Saudi Arabia And Russia Said They May Increase Supplies

Crudeoil on MCX settled down -1.94% at 4508 extended losses as Saudi Arabia and Russia said they may increase supplies while U.S. production gains showed no sign of slowing. Yesterday trading volumes were light due to public holidays in the US and UK. Sentiments remained weak after the news that the OPEC and other producers led by Russia began withholding 1.8mbpd of supplies in 2017 to tighten the market and prop up prices that in 2016 fell to their lowest in more than a decade at less than $30 a barrel. Prices have soared since the start of the cuts last year, with Brent breaking through $80 this month, triggering concerns that high prices could crimp economic growth and stoke inflation.

To address potential supply shortfalls Saudi and top producer Russia have been in talks about easing the cuts and raising oil production by 1mbpd, sources said last week. Meanwhile, surging U.S. crude production showed no sign of abating as drillers continued to expand their search for new oilfields to exploit. Also US energy companies added 15 rigs looking for new oil in the week ending May 25, bringing the rig count to 859, its highest since 2015, in a strong indication that American crude production will continue to rise. Traders will be eyeing on fresh weekly data on U.S. commercial crude inventories on Wednesday and Thursday to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise will capture the market's attention. The reports come out one day later than usual due to Monday's Memorial Day holiday.

Technically now Crudeoil is getting support at 4456 and below same could see a test of 4403 level, And resistance is now likely to be seen at 4571, a move above could see prices testing 4633.

Trading Ideas:

• Crudeoil trading range for the day is 4403-4633.
• Crude oil prices extended losses as Saudi Arabia and Russia said they may increase supplies while U.S. production gains show no signs of slowing.
• OPEC and other producers withholding 1.8mbpd of supplies in 2017 to tighten the market and prop up prices that in 2016 fell to their lowest in more than a decade
• U.S. crude production showed no sign of abating as drillers continued to expand their search for new oilfields to exploit.