The recent run higher brought oil close to overbought territory on the 14-day relative strength index. It could be a signal of near-term weakness.
“Oil prices are struggling for upside following a bout of profit-taking,” analysts at brokerage PVM Oil Associates Ltd. wrote in a report. “The contracts are pausing for breath” and the lull in bullish momentum may last a day or two. “Beyond that, the only way is up,” they said.
The recovery has accelerated as vaccinations are rolled out worldwide, boosting fuel consumption and helping to drain stockpiles that were built up during the height of the pandemic. The OPEC+ alliance is scheduled to meet toward the end of next week to discuss its production policy for August, and some nations are considering backing an output increase.
U.S. crude stockpiles fell by 7.6 million barrels last week, while inventories at the storage hub of Cushing dropped for a second week, according to data from the Energy Information Administration on Wednesday. Gasoline supplies shrank by 2.9 million barrels, compared with a forecast increase in a Bloomberg survey.
Chinese crude oil inventories declined to about 974 million barrels in the week ended June 22, down from more than 1 billion barrels at the end of March, according to Kayrros. Stockpiles at the nation’s 190 terminals were at about 973 million barrels at this time last year, it said.
Meanwhile, U.S. negotiators are preparing to return to a seventh round of indirect talks with Iran on reviving a nuclear deal. A rejuvenated agreement may lead to the lifting of sanctions on Tehran and increased crude flows, although progress has been slow and complicated so far.
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