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IGI Securities Limited – Commodity News

Karachi, January 17, 2018 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market pulled back during the trading session on Tuesday, as traders came back from the Martin Luther King Jr. holiday. The uptrend line on the hourly chart shows signs of support, but I think we will probably find even more support at the $63.50 level. Bouncing from here will probably send the market looking towards the $65 level above, which has offered resistance based upon the large, round, psychological aspect. Otherwise, if we break down below the $63 level, I think the market then drops to the $62.50 level next. Brent markets gapped lower at the open, and then broke below the $70 level. I have an uptrend line on the hourly chart, and if we can break down below the $68.75 level, I think the market continues to go lower, perhaps reaching towards the $67.50 level. The $70 level above is going to continue to offer plenty of selling pressure.

Highlights

Oil prices rose early today on tightening supply and strong global demand

Some analysts warned of a downward correction after a more than 13-percent price rise in a month

Prices have been driven up by production curbs in OPEC nations and Russia, as well as by healthy demand-growth

U.S crude futures were at $63.93 a barrel, up 20 cents, or 0.3 percent

U.S crude stocks fell by 11.2 million barrels in the week to Jan. 5 to 416.6 million barrels, industry group the API said yesterday

Fundamentals

Oil prices gave up some early gains today as analysts warned of a downward correction, but remained well supported on the back of tightening supply and strong global demand.

Tighter fundamentals have lifted both crude futures benchmarks about 13 percent above levels in early December, helped by production curbs by OPEC and Russia, as well as by healthy demand growth.

Brent crude futures were at $69.23 a barrel, up 8 cents from their last close, but down from a high of $69.37 earlier in the day. Brent on Monday rose to $70.37 a barrel, its highest since December 2014, the start of a three-year oil price slump.

U.S. West Texas Intermediate (WTI) crude futures were at $63.84 a barrel, down from a high of $63.89 earlier, but up 11 cents from their last settlement. WTI hit $64.89 in yesterday’s trading session, also the highest since December 2014.

Money managers have raised the bullish positions in WTI and Brent crude futures and options to a record, according to data from the U.S. Commodity Futures Trading Commission and the Intercontinental Exchange.

The Organization of the Petroleum Exporting Countries (OPEC) and Russia have been withholding production since January last year and the cuts are set to last through 2018. This restraint has coincided with healthy oil demand.

Oil remains underpinned by the solid economy with strong oil demand tightening global oil inventories. The past years’ surplus supplies are slowly disappearing. One factor that in 2017 prevented crude prices from rising further was a surge in U.S. production. Despite a recent drop due to extreme cold, U.S. crude output is expected to soon break through 10 million barrels per day (bpd), challenging top producers Russia and Saudi Arabia.

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