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IGI Securities Limited – Commodity News

Karachi, January 05, 2018 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market went back and forth during the trading session on Thursday, initially rallying, but then pulled back a bit. The $61.50 level looks as if it is offering a bit of support. However, if we break down below there, the market probably finds even more support closer to the $61 level. At this point, the $60 level looks to be the bottom of the most recent move, and based upon longer-term charts, I suspect that the $62.50 level above is the overall target, and that’s what I’m aiming for. I believe that the value of the greenback is going to be highly influenced by the jobs number today, and that of course can influence this market. If the US dollar falls off, that should lift this market. Brent markets tried to rally initially during the day as well, struggling at the $68.25 level. Ultimately, we did pull back, but I think that the market is likely to see buyers eventually.

Highlights

Oil rose yesterday to its highest since May 2015, on concern about supply risks

U.S oil stocks fell more than expected, continuing a steady drawdown of supplies in the world’s largest oil consumer

Cold weather across much of the country was expected to keep demand high

U.S crude oil settled up 38 cents at $62.01 yesterday, after earlier hitting $62.21, its highest since May 2015

U.S. crude stocks fell by 7.4 million barrels in the last week of 2017

Fundamentals

Oil prices fell today, dropping away from highs last seen in 2015, as soaring production in the United States undermined the 10 percent rally from lows hit in December that was driven by tightening supply and political tensions in OPEC member Iran.

U.S West Texas Intermediate (WTI) crude futures were at $61.92 a barrel, 9 cents below their last close though still near to the $62.21 high reached the previous day that was the most since May 2015.

Brent crude futures were at $67.96 a barrel, 11 cents below their last settlement, but still not far off the $68.27 high from the day before, also the highest since May 2015.

Investors said political tensions in Iran, third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), had pushed prices higher. The protests in Iran add more fuel to the already bullish oil market mood.

Oil prices have received general support by production cuts led by OPEC and by Russia, which started in January last year and are set to last through 2018, as well as by strong economic growth and financial markets.

This has helped tighten markets. U.S commercial crude inventories fell by 7.4 million barrels in the week to Dec. 29, to 424.46 million barrels, according to data from the Energy Information Administration (EIA). That is down 20 percent from their historic peaks last March and close to the five-year average of 420 million barrels.

Yet given Iran’s oil production has not been affected by the unrest, and that U.S. production will likely break through 10 million barrels per day (bpd) soon, a level so far only reached by Saudi Arabia and Russia, doubts are emerging whether the bull-run can last.

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