Crude oil has had an interesting week. On Monday, the price declined sharply after Donald Trump sent a tweet asking OPEC to increase production with the goal of reducing the prices. This came as the price of crude oil has gained by double digits this year. While OPEC did not respond to the president’s comments, a few officials talked anonymously to the media saying that it will be almost impossible for the cartel to increase production. This is because OPEC+ members’ goal is to see a price increase, which will help them support the economies.
In the recent years, the US has been on both sides of the oil market. As a result of the increased hydraulic fracturing, the country has boosted production and become the biggest oil producer in the world. Every day, the country produces more than 12 million barrels and last year, the country became a net crude exporter. As such, it would be logical for the US to want higher prices, which will support the oil companies. However, the US is also a major importer of crude oil, which means that it would want the oil price lower. Also, multiple studies have concluded that lower oil prices are usually better for a country.
In the past two days, the price of WTI has recovered. This is because traders believe that OPEC will not heed Trump’s call to increase production. The price has also been helped by the slowdown in US inventories. Yesterday, a report by EIA showed that oil inventories declined by more than 8.3 million barrels. Analysts were expecting an increase in inventories of more than 2.8 million barrels. The report showed that the US net imports of 162K barrels a day.
Yesterday, the price of crude oil reached a high of $57.40. It then pared those gains and declined slightly to just under the $57 mark. On the chart below, the price is along the 21-day EMA and slightly higher than the 42-day EMA. The MACD has also declined slightly as shown below. The XTI/USD pair will likely continue with the upward trend, boosted by fundamentals.