Brent Oil hit a three-week low

Brent Oil hit a three-week low of $50.16/barrel in Asia despite Eighth straight weekly decline in the US crude inventories.

Weekly data from the US Energy Information Administration (EIA) showed crude inventories dropped 6.4 million barrels. The drop exceeded the forecast of a 4.4 million barrel drawdown. The gasoline inventories dropped as well. However, the data was not enough to lift prices as fears of a global oil glut persist.

OPEC output rose in May

Reuters reported on Wednesday that output from the Organization of the Petroleum Exporting Countries (OPEC) rose in May as Libya and Nigeria increased their supplies.

Meanwhile, US output rose to 9.34 million bpd last week, the highest since August 2015.

Clash between Qatar and Saudi could threaten the OPEC deal

Reports are doing the rounds that open confrontation between Qatar and both Saudi Arabia and the UAE is looking increasingly likely. Qatar’s willingness to talk to Iran is the main bone of contention. Qatar’s Sheikh Tamim has called Iran a force of stability. Qatar’s increasing tilt towards Iran isn’t going down well with the Saudis. Oil markets may respond negatively if the tensions between the two worsen.

Brent Oil Technicals

Brent was last seen trading around $50.22/barrel. A breakdown of support at $49.75 (Mar 22 low) would open up downside towards $48.44 (May 9 low) and $48.19 (May 4 low). On the higher side, breach of resistance at $50.34 (session high) would expose $51.06 (May 25 low) and $52.04 (200-DMA).

The chart shows falling high and falling low formation with bearish MACD. Another week of losses could yield a bearish 50-DMA and 200-DMA crossover.