Listen to the latest market mood for the USOIL.

One of Wall Street’s best known oil analysts, Helima Croft, fears that the oil market could once again be flooded with excess oil in the coming months as OPEC+ agrees to ease production cuts that have been in place for the last few months. She forecast that if production cuts are eased, that could open the floodgates for smaller OPEC members to break their commitments to cut supply. This in turn would likely imbalance the market. The effective oil cuts in August are now scheduled to be around 8.1-8.2mln BPD.

The fear is that this ‘easing of cuts’ will lead to smaller OPEC members breaking their commitments to production cuts. In May the global oil coalition only delivered around three quarters of the cuts that had been agreed pumping just under 25 million barrels per day. So, further non-compliance is a distinct possibility leading to higher oil supply which should keep oil markets pressured medium term.

Swing trade outlook – We expect this trade to play out over the next 1-2 weeks.

Trade Risks:

  • Make sure you are aware of the futures rollover date if you are trading this as a swing trade. Unexpected fees can add up if you hold this over a rollover date. These dates differ broker to broker, so do check BEFORE initiating a position. If the risk tone switches to ‘on’ and positive vaccine news dominates markets this will invalidate the outlook.
  • Strong signs of global oil demand will invalidate this outlook.
  • Signs that COVID-19 is not going to hit demand levels badly if there is a sustained second wave.