IGI Securities Limited – Commodity News
Web Desk
Karachi, January 11, 2018 (PPI-OT): Crude Oil
Technical
The WTI Crude Oil market looks likely to continue to go sideways, perhaps with a slight negative bias, as we have gotten a little bit overextended on the short- term charts. Regardless, I believe that the markets will be looking to rally on dips, as value hunters will reappear and of course day traders will be interested in taking advantage of the volatility. I believe that the markets continue to be a situation where it becomes “buy on the dips”, as there are a lot of factors working in favour of the oil markets currently, including production cuts coming out of both Russia and OPEC countries, but at the same time the US dollar has been getting beaten up a little bit of the last couple of weeks, and that has provided a little bit of bullish pressure as well. Brent markets also got a boost during the last couple of sessions, as the inventory numbers came out rather bullish coming from America.
Highlights
A rally that kicked off in June has boosted oil prices to the highest in more than three years
The oil price downturn is now 3½ years old, but it didn’t gather devastating momentum until OPEC’s fateful Thanksgiving day meeting in 2014
Now, oil prices are at the highest closing levels since December 2014
U.S crude ended Tuesday’s session at $62.96 per barrel
In the first half of 2018, the seasonal drop in oil demand could pull crude futures out of sync with other commodities
Fundamentals
Oil dipped away from three-year highs today in Asian session on signs that a 13-percent rally since early December may have run its course, although a surprise drop in U.S. production and lower crude inventories offered prices some support.
U.S West Texas Intermediate (WTI) crude futures were at $63.46 a barrel, 11 cents below their last settlement, though still close to a December-2014 high of $63.67 per barrel reached the previous day.
Brent crude futures were at $69.05 a barrel, 15 cents below their last finish, albeit also still close to the previous day’s peak of $69.37 a barrel – the highest level since an intra-day spike in May, 2015.
The mounting downward pressure on prices is also showing in the physical oil market, where OPEC’s No.2 and No.3 producers, Iran and Iraq, this week cut their supply prices to remain competitive with customers.
Oil markets have so far been generally supported by a production cut led by the Organization of the Petroleum Exporting Countries (OPEC) and Russia that started in January last year and is set to last through 2018.
More immediate price support came overnight from the United States, where crude inventories fell almost 5 million barrels in the week to Jan. 5, to 419.5 million barrels. That’s slightly below the five-year average of just over 420 million barrels.
U.S. production fell 290,000 barrels per day to 9.5 million bpd, the EIA said, despite expectations of U.S. output breaking through 10 million bpd. The drop is, however, expected to only be for the short-term, likely due to the extreme cold in large parts of North America which has shut down some onshore producers.
