May 28, 2021 14:06:16

Next Tuesday’s OPEC+ meeting is a big one for oil watchers as the cartel should decide if they are going to stick to their commitment of increasing output in June by 700million barrels per day and then by an additional 840mn bbl/day the following month. The key question is with additional Iranian supply potentially coming into the market, will OPEC+ have to change this plan?

Brent and WTI are also at an interesting juncture. Spreads between two similar but different products can give us some insight into the current situation in a market. In the case of oil, the spread between WTI and Brent has narrowed to the closest since early December and is trading at a discount of less than $2.50.

This signals a relatively more constructive market with demand in the US now growing as the economy continues to reopen, while the start of the summer driving season will certainly add another tailwind. Of course, the Iranian nuclear talks are critical to the supply picture as any positive breakthrough will see prices move lower. Similarly, new extended lockdowns in oil hungry nations would put another dampener on demand.

Technically, prices have been well supported by the 50-day SMA and the long-term uptrend from the November lows has paused near recent highs at resistance in the 69.66 to 70 zone. The MACD has creeped into positive territory and with pressure building for higher prices, bulls can either wait for a break higher for confirmation or position for that move ahead of resistance. The March high sits at $71.36 with May 2019 highs around $73.34 before the April spike high at $75.58. Stops can be placed below the 50-day SMA with strong support at $64.60.