Crude oil prices tumbled nearly 4.5% yesterday evening, to a near-five-month low, triggering knee-jerk reactions in US energy stocks.

Energy (-1.9%) was the worst performing sector in the US market, and today we may see some selling pressure on Singapore’s oil and gas names as well. 

The big slump in the oil price was a result of rising glut concerns especially over the growing US supply. US commercial inventories are building up at a faster-than-expected pace, and now stand at 528 million barrels, close to their historical high. 

US rig count numbers showed no hesitation over climbing higher too. According to Baker Hughes’ active rigs count, the number of US rigs increased by 13 to 870 as of 28 April, more than doubling from 420 just one year ago. 

These figures are causing investors to worry that an increase in output from the US will likely offset OPEC’s production cut. And as the WTI price fell close to $45 per barrel, it wiped out all of the gains since OPEC’s move to curb output in November last year. A weak oil price should encourage OPEC to extend the timeframe of its production freeze until the current unstable supply-demand relationship reaches equilibrium again.

Technically, WTI crude price may find some support near the $45.4 area, which is the 23.6% Fibonacci extension level. SuperTrend remains in bearish red colour, suggesting that the downtrend momentum should prevail in the near term. RSI dived further into the oversold territory, suggesting that oil prices have been severely oversold in recent days. This could potentially trigger a new wave of ‘short-recovery’ activities, should some positive news come out to trigger a meaningful rebound. 

Crude Oil West Texas - Cash

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