WTI Outlook – Volatility arises again steering the Oil market.
This article is originally referred from IronFX - Peter Iosif and Angelos Zittis.
Volatility arises again steering the oil Market as the industry is under new pressure steaming from various political and geopolitical matters.
Yesterday, oil prices fell flat to mark its biggest one-day slump since early February with many news listed as a potential reason to this bearish market movement.
To start with, on Sunday Bahrain officials have confirmed that a very large oil and gas reserve was identified in the Gulf kingdom’s territory.
It is located in the country’s west coast and it is seen to be enough to support the long term extraction of oil in the country.
These comments helped boost comments about oil supply reserves and ultimately forced oil prices to fall.
Other analysts blamed the sharpest one day drop in 7 weeks on various other financial instruments dropping simultaneously.
Some of the US biggest markets indicators including the S&P 500 index, Dow Jones Industrial Average (DJIA) traded lower indicating that appetite for stocks was seen fading at the moment which eventually influenced oil prices.
When the appetite for stock trading is down the market could perceive it as a reduction in demand and may influence crude futures also.
In the Middle East, there is a dispute between the biggest oil producers and OPEC members, Saudi Arabia and Iran as to where Oil prices should trade.
The Saudis insist prices should move close to $70 per barrel and on the other hand the Persians are looking to gain on the volume and seem to prefer prices around $60 per barrel.
Iran is involved in the Shale Oil producing Industry which is flooding the market with supply at the moment and so the lower price could be more suitable for its market conditions currently.
Moreover, Russia is in talks with OPEC to set a joint venture once the current deal on cutting oil output expires at the end of this year.
Russia and Saudi Arabia relationships have strengthened and are on excellent terms lately, mostly due to the successful application of the global oil pact.
As OPEC and Russia plan to stick and even strengthen their strategy, it is our opinion that traders or money funds with large long positions in the Oil industry are not eager to let go of the future potential of higher prices.
The pact is regarded a strong and influential plan and goal oriented which makes it somewhat unstoppable towards boosting oil prices.
We see the case for profit locking to take place when the price reaches or even surpasses $70 per barrel.
Turning to the US, the last rig count performed by Baker Hughes on the 29th of March 2018, resulted in a reduction of rigs by -7 totaling 797 and this could influence the API crude stocks, which are to be released on the 3rd of April 2018.
Less supply into the market could help push prices higher this week.
President Donald Trump Environmental Protection Agency (EPA) is looking to readjust fuel efficiency, greenhouse gas emissions rules for autos set by Obama.
Trump officials stated that the plan was brought forward on unrealistic standards that were set too high.
Rolling back the standards could require Oil demand to be readjusted in order to cover the new circumstances and could impact the prices of the black gold.
Technical Analysis on Oil market price
Crude Oil is currently trading around $63.20 per barrel.
On the 4 hour chart, the RSI indicator is very close to the 30 level indicating the commodity may be in an oversold session and traders could be preparing to jump into the market and buy just before the API news is to be released at 11:30 GMT in order to take advantage of the upcoming news.
Oil rigs have dropped by -7 since their last count as stated in our fundamental analysis above and this could hurt supply in the US this week.
If a negative figure would be released the bulls could overtake the market and we may see it heading towards the $64.55 (R1) Resistance level and even breaching it moving higher towards the $67.50 (R2) Resistance zone.
Even the slightest drop in supply since last week could boost oil prices.
If black gold is mixed up with financial and fundamental data, the commodity could react accordingly and move in a sideways manner with some bullish tones, between the $64.55 (R1) resistance level and the $62.30 (S2) Support barrier.
If the commodity is to fall in a bearish movement, it could test the $62.30 (S1) Support level and even breach it moving towards the $60.20 (S2) Support hurdle.
This case could be supported by the financial data released on Wednesday with an increase of 1.667M barrels expected to be released.
Original Source: IronFX - Peter Iosif and Angelos Zittis