The progress for oil prices during May has been an interesting one, and indeed one I focused on early in the month as the big operators moved in on the 5th May to buy the market, and driving the price off the lows of the session which duly closed with a dramatic and clear signal. An unequivocal signal of stopping volume, and one which duly delivered with the WTI contract recovering much of the loss incurred in April, to currently trade at $50.77 per barrel at the time of writing.

And of course, also at the time of writing, the OPEC meeting in Vienna is now in full swing with cuts in supply now looking set to extend a further nine months to March 2018. These cuts are likely to be shared once again and between both members and non members, with Russia once again leading the way for non members. Market reaction to the news filtering out from the meeting has been generally one of disappointment, with intra day volatility the norm, and indeed looking set to close with a similar candle on the daily chart. The reason for this disappointment is twofold. First, markets expected the cuts to be extended by a 12 month period and not a six month period as now appears to be the case. Second, the depth of such cuts appears to be in line with those agreed earlier in the year with both sides agreeing to remove around 1.8 million barrels per day.

The market had been expecting this to be increased. This sentiment was reinforced by Saudi Energy Minister Khalid al- Falih who was quoted as saying ahead of the meeting: ‘There have been suggestions of deeper cuts, and many members have indicators flexibility, but that won’t be necessary‘. However, he went on to say that both Nigeria and Libya would once again be excluded from the program of cuts as both countries continued to deal with local unrest, and a cut in oil supply would not be seen as helpful to these members at this time. All of this is ahead of the OPEC press conference due shortly, which no doubt markets will be watching with interest for any deviation from the perceived forecast, and if the news is as expected, then this is likely to dampen bullish sentiment further.

Whilst the fundamentals continue to dominate the price action for oil, from a technical perspective the ceiling of resistance is now building in the $52 per barrel region, with the volume point of control anchored below at $49.70 per barrel and denoted with the yellow dashed line, and a level that now seems likely to be retested in due course.