IGI Securities Limited – Commodity News

Karachi, January 03, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market initially fell during the trading yesterday but found enough support under the $45 level to turn around and send things towards the 20 day EMA above. There is a significant amount of resistance built into that area, because it is just below the previous support level and of course the psychologically important $50 handle. With that, any signs of exhaustion should probably be sold, as it anticipated that there is going to be a huge barrier extending from $50 all the way to the $55 handle above there. If it clear the $55 level, then the market could go much higher. Brent market participant sold but then turned around to push towards the 20 day EMA above. The downtrend line continues to offer resistance, so it is only a matter of time before the sellers return. Beyond that, it could see a lot of resistance near the $60 level above as well.

Highlights

Oil prices rose about 2% in choppy trading yesterday, supported by a slight recovery on Wall Street

Crude futures ended 2018 down for the first year since 2015, with WTI slumping 25 percent and Brent tumbling 21 percent

A slowdown in the world’s second-largest economy, and biggest oil importer, can translate to slack in appetite for oil

U.S oil production broke its 1970 record of 10.04 million bpd in November 2017

The United States has become the world’s leading crude producer, surpassing Russia and Saudi Arabial

Fundamentals

Oil prices fell by 1 to 2 percent today amid volatile currency and stock markets and on concerns that an economic slowdown in 2019 will cut into fuel demand just as crude supplies are surging.

U.S West Texas Intermediate crude oil futures dropped by 1.8 percent, o82 cents, from their last settlement to $45.72. International Brent crude future were down 1 percent, or 53 cents, at $54.38 a barrel.

Top exporter Saudi Arabia is expected to cut February prices for heavier crude grades sold to Asia by up to 50 cents a barrel due to weaker fuel margins.

The slowdown in China and turmoil in stock and currency markets is Makin investors nervous, including in oil markets. Slowing economic growth would have a negative effect on oil prices as markets eye the potential for soft petroleum demand.

Oil markets are also under pressure from a surge in supply just as demand growth is expected to slow amid the market turmoil. U.S crude production stood at a record 11.7 million barrels per day in late 2018, making Americthe world’s biggest oil producer.

Supply from Iraq, the number two producer in the Organization of the Petroleum Exporting Countries, is also up, with December exports at 3.7million bpd, up from 3.37 million bpd in November.

Crude production rose 79,000 bpd in October to 11.537 million bpd, the U.S EIA said in a monthly report. The EIA revised its September oil production figure down by 17,000 bpd to 11.458 million bpd.

Leave a Reply