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Fundamental Analysis:

On Monday the 5th of March, the CERAWeek news conference took place in Houston US. In this meeting, the Oil industry’s most important names and firms grouped up in an effort to have a productive dialogue on global Oil matters.

From the OPEC side, it was noted that OPEC and US shale Producers are part of the same industry, hinting that they are seen to have a tolerance between them and not in competition as they are vastly seen by the majority of the public and analysts.

Head of the International Energy Agency (IEA) affirmed that the Shale Oil Producers will maintain the current operations increasing further its oil pumping despite OPEC’s strategy, set to hold back on supply. He also added that the output of Shale producers could be boosted even more if prices remain above $60 USD per barrel.

Other statements from OPEC officials, were directed towards oil producers taking part in both Shale Producing and traditional oil drilling, noting that they should be aware of the consequences on the Oil market in general focusing on all aspects price, supply and demand.

This was due to the fact that, it has been OPEC’s goal and vision to increase Oil prices since the start of their pronounced agreement in 2017 to cut production.  With that said, OPEC’s Secretary noted in his speech on Monday that the agreement to cut production is “as solid as the Rock of Gibraltar.” Adding to that, he made it clear that the IEA demand outlook supports oil prices. However, the fact remains that US Shale producers are currently taking part of OPEC’s market share for the past year.

In the conference, it was also mentioned that oversupply of the market will not only hurt OPEC countries but the whole industry as it can significantly decrease Oil prices, and ultimately knock out producers which are very close to marginal profits. More clearly, as the oil prices decrease, the breakeven price in order to produce gets closer, making Oil producing companies more vulnerable to losses.

On other news, Egypt’s Oil Minister has stated through his interview on Bloomberg that Egypt is to be seen as an OPEC member in the near future. In his comments, he said very confidently that Egypt will be joining the OPEC team sometime 2019 or after and he expects prices to balance supply and demand. However, he made it clear that at the moment his country is an Oil importer.

Moreover, in North Africa, problems seem to persist in Libya as on Sunday one of their main pipelines which are functioned by Libya’s National Oil Corporation (NOC) was shut down. The pipeline was revived on Monday. This is closely tied to the fact the on Monday Oil Prices moved higher. The cease of Oil production was immediately out as fresh news for the Oil Market to process. Yet, shortly it was said the 300,000 barrels could be produced in 2 days.

In Asia, issues are seemingly arising as increasing importing costs are forcing Asian oil buyers to look for alternative solutions. Cargo & tanker rates which arose for the transport from the US to Asia have increased from February to March. This may create some opposition to US Oil exports in Asia which have been rising significantly in 2018 considering that suppliers in the Middle East and Africa are roaming and ready to bargain at lower costs.

It is evident that US Shale Producers are looking to take advantage of increasing demand from Asia as recently Oil imports are seen to increase. In our opinion, there seem to be holes in the demand forecasts in the Oil industry. Week by week supply is seen to rise but Oil prices are firmly holding above 60 USD per barrel.

Yesterday, the API Weekly Crude Oil Stock were realised with a surplus of 5.661M. This is not a surprise to the market, as from the CERAWeek news conference at the start of the week, the US Shale producers stated they intended to keep up with producing and may extend even further. This pushed Oil Prices below the 62.30 (S1) now turned into a resistance level.

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Technical Analysis:

Current Price: $62.06 Crude oil has been in a positive sentiment since Monday after the fundamental news on Libya’s supply disrupts supported the commodity. The positive sentiment continued on Tuesday showing a bullish market movement could be in view.

Today, the Crude Oil Inventories are expected to be released at 17:30 GMT +2. There is a forecast of +2.7 MB surplus expected. If this outcome is realised prices could fall on a minor level heading towards the $61.50 (S1) Support barrier or even lower.

If any number below the +2.7 MB forecast is realized could lead Oil prices to break the $62.50 (R1) resistance line and lift them to reach the $63.50 (R2) Resistance hurdle.

In addition, at the moment the RSI Indicator seems to remain around 50 which gives an uncertain sentiment, however with the crude oil news forecast for the day, it is our opinion that the sentiment bearish.

Crude Oil 4 Hour Chart below

oil 07/03/2018 | EconAlerts



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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.

source: FXGiants

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