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IGI Securities Limited – Commodity News

Karachi, January 09, 2018 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market went sideways during the day on Monday, but are starting to reach towards the uptrend line. The market looks likely to find buyers soon, perhaps in concert with the US dollar falling. After all, it was a bit stronger during the day on Monday, so it makes sense for oil to drift a little bit lower as well. If we do break down below the uptrend line, I think that the market is going to go looking for the $60 region. That’s an area that will be even more supportive in my estimation as it is a large, round, psychologically significant number. Brent markets went sideways overall during the day on Monday, but are approaching an uptrend line that should be important. I think that the $67.50 level should be important as well, as it has offered support several times over the last 48 hours, and of course has offered resistance as recently as last week.

Highlights

Oil extended gains above $62 a barrel before U.S government data

Data forecast to show crude stockpiles declined for an eighth week

Political tensions simmer in Iran, OPEC’s third-biggest producer

Futures added as much as 1.3 percent in New York to the highest intraday level in almost three years

U.S. inventories probably fell by 3.75 million barrels last week, according to a Bloomberg survey

Fundamentals

U.S oil prices hit their highest since 2015 again as speculators bet on further price rises amid OPEC-led production cuts and a dip in American drilling activity, though some warned the rally could run out of steam.

U.S. West Texas Intermediate (WTI) crude futures were at $62.16 a barrel – 43 cents, or 0.7 percent, above their last settlement. They earlier matched a May-2015 high of $62.56 a barrel.

Beyond equalling that 2015 high, which was a short intra-day spike, Tuesday’s peak was the strongest level for WTI since December, 2014, at the start of the oil market slump.

Brent crude futures were at $68.11 a barrel, 33 cents, or 0.5 percent, above their last close. Brent touched $68.27 level in the last week, its highest since May, 2015.

Investors said prices were mainly being driven by speculative money being poured into crude futures on the notion of a tighter market following a year of production cuts led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, which are set to last through 2018.

Speculators continued to increase their net long in ICE Brent. According to exchange data, speculators increased their position by 4,175 lots to leave them with a record net long of 565,459 lots.

A slight dip in the amount of rigs in the United States drilling for new oil was supporting WTI. The number of rigs drilling for oil fell by 5 to 742 in the week to Jan. 5, according to oil services firm Baker Hughes.

The U.S. rig-count remains significantly above the low of 316 in June, 2016, and U.S. crude output is expected to break through 10 million barrels per day soon, hitting a level that only Russia and Saudi Arabia have achieved so far.

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