IGI Securities Limited – Commodity News

Karachi, January 07, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market bounced during the week but ran into trouble at the downtrend line that you see marked on the chart. Beyond that, it has the $50 level above that could probably cause quite a bit of resistance. If it break above the $50 level, the market could go to higher levels, perhaps as high as $55 where it would see even more resistance. Because of this, it anticipate that it probably will get a little bit of a pullback, but it clearly have an area that if it break above, that would be a bullish turn of events. Brent markets rallied as well, breaking into a downtrend line, but giving back some of the gains. Because of this, the market will probably continue to struggle at the $60 handle. Short-term pullbacks could be buying opportunities for those who are willing to put a stop loss just below the $50 level. However, if $50 gets broken to the downside, this market will go much lower.

Highlights

Oil prices surge more than 4 percent after falling by $1 a barrel earlier in the session

Crude futures jumped as much as 5 percent earlier in the session

Crude oil inventories rose by 7,000 barrels in the week ending Dec. 28, to 441.42 million barrels

Brent crude oil forecast for 2019 from $70 per barrel to $62.50 a barrel because of the strongest macro headwinds since 2015

OPEC oil supply fell in December by 460,000 barrels per day to 32.68 million bpd, led by cuts from top exporter Saudi Arabia

Fundamentals

Oil prices jumped by more than 1 percent today, pushed up by optimism that talks in Beijing can resolve a trade war between the United States and China, while supply cuts by major producers also supported crude.

Brent crude futures were at $57.86 per barrel, up 80 cents, or 1.4 percent, from their last close. U.S. West Texas Intermediate crude oil futures were at $48.77 per barrel, up 81 cents, or 1.7 percent.

More fundamentally for oil markets, investors said crude future prices were being supported by supply cuts started late last year by a group of producers around the Middle East-dominated Organization of the Petroleum Exporting Countries (OPEC) as well as non-OPEC Russia.

In the United States, crude oil production stayed at a record 11.7 million barrels per day in the last week of 2018, according to weekly data by the Energy Information Administration (EIA) released on Friday.

Prior to the tit-for-tat tariffs being imposed from the middle of last year, crude oil was a success story in the U.S-China trade relationship as Beijing bought increasing volumes of booming U.S shale oil production.

Using crude oil for politics is certainly nothing new, so the resumption of trade between China and the United States may well depend on the status of talks between the administration of President Donald Trump and its counterpart in Beijing.

However, if the U.S-China crude trade was strictly about economics, it’s likely that U.S crude prices will have to fall some more, especially relative to competing grades of West African crude.

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