On Tuesday Oil prices followed the bearish sentiment seen on Monday, amid fears of over-production supply flooding the market. All the gains made from Friday’s news that the number of active U.S. oil rigs declined by four last week to 796 were seen to diminish. This was the first decline in US oil rigs in seven weeks.
It is now evident, that various Hedge fund managers holding bullish long positions in the black gold market are concerned with Oil output statistics rising. They could be characterized as nervous and skeptical as to whether these positions are worth holding as a medium to long-term investment. Reductions in net long positions were seen in five of the last six weeks, backing the fact that Oil prices have remained rather stagnant leaving traders unsatisfied and puzzled.
In order to provide the full picture, we must state that overall the Oil Market is still in a bullish tone remaining above $61 per barrel although currently is seen to be losing momentum comparing to the strength it displayed in the start of the Year.
On the other hand, it is inexact if this is a temporary cease and the price rally will be enhanced shortly. Even though the pressure of excess producing has hurt oil prices or better held them static, prices are still firm and balancing out both the increasing demand and supply. Adding to that, the weakening of the USD could be providing Oil prices with that extra boost to remain at relatively high levels.
On other news, major oil firms including SHELL & Exxon, are assessing the opportunity of oil exploration in Argentina. There seems to be a barrier of high costs associated with political activity in the country, seen in the previous years in Argentina, forcing Spanish energy giant Repsol to flee the scene.
However, at the moment things seem to be unfolding very well for the Latin American country as the current government policy’s goal is to create an ideal environment that is attractive for investments.
Turning to the Middle East, Iraq officials confirmed they intend to lessen their Oil related products imports in the near future. The estimation of import cutting was said to be around 25%, explaining further that their oil factories were hurt and currently under reconstruction, giving the Islamic state actions of war as a cause for that.
In China, the much-anticipated Yuan priced crude oil futures are expected to be launched shortly. Oil futures contracts will commence on March 26 and they will be tradable through the Shanghai International Energy Exchange (INE). The new Yuan priced crude oil futures could be related to the fact that Asia has exceeded other major regions like Europe and America, in regards of Oil demand and consuming, with expectations of increasing even more. This act is seen as positive for China which could possibly influence oil prices further with traders looking to follow this expansion in the Oil Market.
This is a hard week ahead for the Oil Market as the OPEC meeting on Wednesday along with the API & Crude oil inventories will be released and are sure to test the oil price’s strength. In the long term, the most accepted view is that Oil inventories will rise by the end of 2018 with the shale producers dominating, causing prices to fluctuate and adjust according to demand which is also rising.
Crude oil is currently trading around 61 USD per barrel.
American Petroleum Institute reports are released on Tuesday night at 22:30 (GMT+2). With the decrease in Oil rigs in the US, stated last Friday it may be the case that the news could be realized with a reduced figure in comparison to last week. This could boost Oil prices even further above the $61.50 (S1) Support level and aim for the $62.30 (R1).
We do not expect OPEC to make significant statements on their meeting on the 14th of March. They have stated multiple times that they aim to stick with their strategy and even may tighten cutting production.
This can give a positive momentum for Oil prices again heading towards the $62.30 (R1) Resistance Line.
Crude oil inventories have a forecast of approx. 1.5M increase. Taking in mind that the previous release was 2.4M should a number below that be realized it could strengthen prices moving towards $62.30 (R1) Resistance Line.
In all cases we see oil holding its strength above $60.40 (S2) Support hurdle.
Crude Oil 4 Hour Chart below:
All trading involves risk. It is possible to lose all your capital
This information is not considered as investment advice or investment recommendation but instead a marketing communication. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.