U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are trading flat shortly before the regular session opening. The U.S. futures contract is straddling a key technical level at $63.48, using it as support. While the Brent futures contract is hovering slightly below its key technical level at $71.77.
The price action in both markets seems to be indicating top-heavy conditions. Buyers appear to be waiting for fresh news as tighter supply conditions seem to have been offset by concerns over a global economic slowdown and lower future demand.
The lack of price movement so far this week could also be caused by thin, light pre-holiday trading ahead of Easter week-end. The U.S. markets are closed on Friday.
Major Concerns Weighing on Prices
The main concerns for traders today are expectations of higher U.S. inventories and the possibly that Russia may jump ship and abandon its participation in the OPEC-led production cuts.
U.S. Stockpiles to Rise
Later today at 20:30 GMT, traders will get their first taste of this week’s crude oil inventories when the American Petroleum Institute releases its weekly report. On Wednesday, the U.S. Energy Information Administration (EIA)’s weekly inventories report is expected to show that stockpiles rose 1.9 million barrels during the week-ending April 12. This would mark the fourth straight increase.
Will Russia Stick with Deal?
Besides concerns over future demand, oil traders are now dealing with the possibility that Russia may decide to leave the group led by OPEC and its allies in order to boost output and battle with the United States for market share. This could be bearish for crude oil with some analysts predicting oil prices could return to the $40 range.
Traders appear to be reluctant to chase prices higher at current levels, given the new concerns over future demand and the possibility of higher production from Russia. It looks as if prices are being pressured by a combination of little buying and more profit-taking and position-squaring.
With a long-holiday week-end coming up, buyers seem to be a little reluctant to add to positions. This could keep a lid on prices throughout the session.
This article was originally posted on FX Empire
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