WTI crude down more than 3%
A fresh wave of oil selling hit as crude prices fall towards the lowest levels of the month. On the day, WTI crude is down $1.90 to $57.82.
Goldman Sachs was out today with yet-another bearish call on crude. They believe that oil near these levels will bring back idled US drillers and contribute to the supply glut.
"We believe that should WTI prices remain near $60 a barrel, US producers will ramp up activity, given improved returns," Goldman analysts wrote.
The main target on the chart at the moment is last week's low near $57. Prices reversed from there on a larger drawdown in API inventories. That report is delayed until Wednesday this week and the official data is due a day later. The consensus estimate is for a 1500K barrel drawdown.
Even with the drawdown, US inventories are at 482.2 million barrels, more than 100 million barrels above the 5-year average for this time of year.oil
Iran is also talking about ramping up production capacity as soon as this month. The OPEC meeting is June 5 and the best hope for oil bulls is a bit of jawboning there but threats about supply cuts aren't likely to be backed up by action.
What's the trade?
I'm a big oil bear and it's starting to come to fruition. The US dollar is reasserting itself and oil declines could quickly begin to feed on themselves. A drop below $57 targets $54.24, which was the Feb high.
