IGI Securities Limited – Commodity News

Karachi, February 01, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market has broken above the $55 level. It seems to go higher based upon this breakout. The jobs number coming out and that of course could have a major influence on the greenback as well as the idea of demand when it comes to crude oil. Brent markets have not broken, as the $64 level offer significant resistance. The Brent market could very likely follow WTI given enough time. There is support at the 20 day EMA but given enough time it’s likely that the bullish pressure should overwhelm and it should break out. The jobs number being strong should send this market higher as well. While breaking down below the $60 level seems very unlikely at this point. Based on the early price action, the direction of the March WTI crude oil futures contract is likely to be determined by investor reaction to the main top at $54.98.

Highlights

US crude fell to $54.15 a barrel from the opening of $54.24, while Brent retreated to $61.60 a barrel

US production steadied last week at 11.9 million bpd, a record high

Gasoline stocks fell 2.2 million barrels, making 5% above averages while distillate stocks, including heating fuel, fell 1.1 million barrels

Oil prices are up 18% in January, on track for the first monthly profit since September

Venezuela’s oil exports tumbled to one million bpd in 2018 from 1.6 million bpd in 2017

Fundamentals

U.S crude prices settled lower as uncertainty about trade overtook bullish news about production cuts and U.S monetary policy that drove prices higher early in the session.

Oil prices powered up after data showed a decline in OPEC’s output, and amid expectations of potentially higher global demand on crude. The dollar index rose 0.2% to 95.2, with an intraday high at 95.2, and a low at 94.8.

OPEC and its allies announced supply cuts effective Jan. 1 after worries over a global glut caused heavy price losses in late 2018. OPEC oil supply has fallen in January by the largest amount in two years.

OPEC’s crude oil production in January dropped by a massive 890,000 bpd compared to December, the largest monthly decline in the cartel’s production since January 2017 when the initial production cut deal began.

OPEC and its non-OPEC partners led by Russia agreed in December to remove a total of 1.2 million bpd from the market in the first six months of 2019, with OPEC cutting 812,000 bpd and non-OPEC producers reducing output by 383,000 bpd, including a 230,000 bpd cut from Russia.

WTI crude fell 44 cents a barrel to settle at $53.79. Brent crude futures for March delivery rose 24 cents to $61.89 a barrel. Investors have been concerned about the outcome of the U.S-China trade talks, which could shape the outlook for oil demand in the world’s largest economies.

The Federal Reserve held interest rates steady, signalling its three-year drive to tighten monetary policy may be at an end amid the cloudy outlook for the U.S economy.

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