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IGI Securities Limited – Commodity News

Karachi, January 04, 2018 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market initially went sideways during the trading session on Wednesday, but then shot towards the $61.50 level above. The market looks likely to roll over from here though, because we have seen so much in the way of an overextension. A pullback should be a buying opportunity though, with the $60 level below possibly offering a bit of a “floor.” I think that the market is probably going to go looking towards the $62.50 level above which is a larger timeframe area that the market has paid attention to before. In general, I believe that the following US dollar will continue to help, and of course the writing and Iran will continue to have a lot of traders nervous about the Middle East. Brent markets went slightly sideways initially during the trading session on Wednesday, but then shot towards the $67.50 level. A pullback from there is an opportunity to go long.

Highlights

Oil climbed as optimism on the global economy, cold weather and political unrest bolstered a market

Crude is having its best start to a year since 2012, after hitting $62 a barrel

Swollen inventories in the U.S are declining and could shrink further as winter storms boost demand for heating fuel

The rise in oil prices has mainly been caused by the freezing polar vortex hitting the U.S

Oil has risen for two years running as the OPEC led a coalition of oil producers in cutting output

Fundamentals

Oil prices today in Asian session hit their highest in more than two and a half years, touching levels not seen since before a slump in commodity markets in 2014/15, boosted by tensions in key producer Iran and by ongoing OPEC- led output cuts.

Prices were also buoyed by Asia’s stock markets, which flirted with 10-year highs today amid strong data from leading economies including the United States, Japan and Germany.

U.S West Texas Intermediate (WTI) crude futures were at $62.16 a barrel, up 53 cents, or 0.9 percent, from their last close. They touched $62.21 shortly before, their highest level since May 2015. Brent crude futures, the international benchmark for oil prices – were at $68.23 a barrel, up 39 cents, or 0.9 percent, after revisiting a May 2015 high of $68.27 shortly before.

Beyond a brief intraday spike in May, 2015, these were the highest crude price levels since December, 2014, at the start of the oil price downturn. Freezing weather in the United States has also spurred short-term demand, especially for heating oil.

The market is clearly getting more bullish on oil as inventory levels get closer to the five-year average. Geopolitical uncertainty in Iran, OPEC’s third largest producer, is also helping to support the price as citizens are again protesting the government.

Iran’s elite Revolutionary Guards have deployed forces to three provinces to put down anti-government unrest that has been ongoing for a week, their commander said yesterday.

In the United States, crude oil inventories fell by 5 million barrels in the week to Dec. 29 to 427.8 million barrels, industry group the American Petroleum Institute said yesterday.

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