eightcap open oil cfd energy photo eightcap open oil cfd energy photo

Oil prices declined sharply on Wednesday after the selloff in the global stock markets, amid fears of weakening demand in the near future.

Analysts, point out that the clear risk off mode that we are seeing across the markets is also “hitting the oil and those previous supply concerns have simply evaporated”.

At this point, it should be noted that the United Arab Emirates Energy minister, Suhail al Mazrouei, stated that the country has already started to increase its oil production in the third quarter and expects further increases in October and November to meet market demand, remaining committed to work with OPEC.

On the other hand, OPEC general secretary, Mohammad Barkindo stated that OPEC is very concerned about spare capacity, as there is a continued decline in oil industry investment, stemming from the market down turn.

Such statements could strengthen arguments for a shortage in the supply chain that could prove structural, as it implies that low prices and future investment are incompatible.

Further east, US sanctions seem to levy on the Iranian economy, as the local rial has slided considerably and products have started to disappear from supermarket shelves.

Currently the Iranian government’s resoluteness seems to be firm, however the time factor would be the real test.

Another worry for the supply chain could be hurricane Michael which has turned into a dangerous Category 4 hurricane before it weakened into a tropical storm.

Producers in the Gulf of Mexico, have cut daily oil output by 42% due to the hurricane.

It seems to be the case though, that Michael’s turn to the coast of Florida and Georgia later on, may have spared the infrastructure of the oil market in the region and the expected down turn may be brief.

The overall bearish sentiment enhanced on Wednesday, as the API weekly Crude oil inventories figure came out far higher than expected reaching its highest injection reading in 12 months, of 9.78 million barrels, if compared to its respective forecast of 907 thousand barrels.

Hence, it showed a slack in the oil market, which if confirmed by today’s release of the EIA crude oil inventories figure, could also weaken oil prices.

Furthermore, the EIA said on Wednesday in its monthly forecast that US oil output is expected to rise 1.39 million barrels to a record 10.74 million barrels per day (bpd), which added further pressure on oil prices.

Also Goldman Sacks seems to expect that US shale oil producers will continue to increase by 14 million bpd their output, every year until 2021, according to a new report of the investment bank, however that could constitute a long term bearish factor for the oil market.

EIA also seems to chip in to the argumentation, as in a report, U.S. crude oil output in 2018 is expected to grow more quickly than previously forecasted, to a record high.

Crude production was forecasted to rise by 1.39 bpd to 10.74 bpd this year and could actually reach above 11.03 million bpd, marking a new breakthrough.

The agency also expects output to grow at a faster pace in 2019.

The increase of the production output could have been boosted by technological advances that could made it easier for producers to tap shale oil formations.

On the demand side of the equation, EIA now forecasts that oil demand will rise 450,000 bpd in 2018, compared to 470,000 bpd previously, while for 2019 demand could rise to 230,000 bpd if compared to previous forecast of 250,000 bpd.

Overall, the bearish sentiment could strengthen as the report more or less, forecasts supply to grow faster and demand to weaken and such a scenario could have adverse effects on oil prices.

Crude Oil 1 Hour Chart

Resistance: R1-73.03, R2-74.16, R3-75.10, R4-76.22
Support: S1-71.40, S2-70.00, S3-68.56

Since our last report Crude Oil trading sessions, ended lower losing most of its gains made thus far in October.

At the moment crude oil is trading at its lowest price reached during October, which could be due to last night’s surplus reading from the API weekly figure of 9M barrels, which helped send oils price even lower.

Today EIA weekly figure is to be released with a forecast of +2.4M barrels surplus.

If the commodity is overtaken by a bullish market, it could move higher towards the R1 73.03 resistance level and even aim for the R2 74.16 resistance barrier.

Technically Crude oil’s trend according to the previous recent sessions could be bearish.

If the Oil market persists in a bearish movement then the next price below the current level could be S1 71.40 support barrier.

Moving below that level, means aiming for the S2 70.00 support barrier, which is a key level and indication of further market appetite.

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