Crude oil tumbled last week as OPEC decided to hold its production quota, despite the oversupply in the oil market, yet a report showing a drop in the number of U.S. rigs actively drilling for oil helped prices to trim some of the losses.
Oil prices remained under pressure before the OPEC announcement, although their decision was widely predicted, but the rise thereafter shows the drop in OPEC’s dominance over crude prices.
OPEC members opted to retain their market share, knowing the threat coming from the rising influence of the thriving U.S. shale.
Oil ministers from Iraq, Venezuela and Angola said in Vienna this week that a price range between $75 and $80 a barrel is fair.
However, further rise in oil prices may help high-cost U.S. shale producers, as higher prices would help them generate profits.
Crude prices recovered some its losses on Friday after a report released by Baker Hughes signaled the number of U.S. rigs marked its 26th straight weekly decline.
U.S. crude inventories slipped by 1.9 million barrels in the week ended May 29 to bring that total to 477 million barrels, which is close to the highest level in at least 80 years.
Oil prices ended last week on a drop, but the price range remains within narrow range, where prices have found strong support areas.
As depicted on the daily chart, crude oil found ground from the support line, which is located near SMA 50, while a key support came from the major support line noting that the weekly closing above it may prevent prices from incurring severe losses.
For this week, oil prices are likely to face resistance at SMA 20, where a rise above it could sent prices to resistance at $60.70.
It is clear that crude prices halted its rise as it hit resistance at the 50-center line of the RSI 14 momentum indicator.