Fundamental & Technical Analysis on WTI Crude Oil market!
This article is originally referred from IronFX News.
Crude Oil’s yesterday’s session was quite impressive as the commodity was seen changing direction at different timeframes and was characterized as a rocky session by many analysts.
At the start of yesterday’s American session crude oil prices weakened amidst confirmation from Saudi Arabia, that they will increase production in the current month.
It must be noted that this decision is closely related to President Trump’s urge towards the Kingdom to increase supply in hopes to offer support to the global Oil market.
The Kingdom of course took charge and considered the proposal, and came out with the decision that concurred to the US president’s proposal.
Saudi officials stated that the Middle Eastern country is willing to step in and boost production using its spare production capacity, exemplifying its position as a giant Oil producer that can pull strings on a global level.
It must be noted, that various other sources stated that Saudi Arabia did not directly say it will follow-up in production, instead this scenario was used as a positive headline by other news agencies.
Whatever the case, the news had a negative effect and dropped Crude Oil prices in the early American session, but that was not the last price action of the commodity for the day.
On the other side, on Tuesday the American Petroleum Institute (API) released a drawdown for a 3rd consecutive week indicating a -4.5M barrels deficit.
Oil prices did not hesitate to reflected sensitivity towards the drawdown.
This caused the black gold to regain most of its lost value in the previous hours.
Analysts, stated that the reason to the draw-down was Canada’s out-of-service Syncrude systems which it’s disrupt in supply is expected to persist until the end of July.
It was also confirmed that major oil ports in Libya have closed due to an armed struggle that consequently removed 850,000 barrels a day from the global oil market. This fact also provides support to Oil prices.
On a separate note, according to Reuters, Asia imports coming from Iran jumped their peak in eight months last May.
In a more statistical note, Asian countries including China, India, Japan and South Korea imported 1.8 million barrels per day from Iran and that was approximately 15 percent higher compared to 2017 and the highest level since September.
The US prepares to turn against any country that continues to do business with Persia, in an effort to cut all their ties with the outside world economically.
Some of Iran’s crude oil buyers are now coming to grips with the fact that, in the future they may not be able to depend on the middle eastern country for supply, and are forced to look elsewhere to cover their demand.
It is rumored that India is already taking actions to find oil from other producers in order to cover for their country’s needs as they are among the greatest oil consumers of our times.
Furthermore, Japanese refiners are purchasing U.S. crude as it becomes cheaper compared to their usual Middle East supplies and could be considering U.S. shale production for the future as a replacement for supplies from Iran.
On Tuesday, Iran’s President Hassan Rouhani was quick to reply that any mistreating of his country will end up in a retaliation action from their side.
He made it clear that if the US is pressing towards forcing other countries not to do business with Iran, they will block important oil shipping routes and especially the Strait of Hormuz which is considered vital to the world.
The positive sentiment for the oil market could continue as its prices have reached a +2 years high and are somewhat stable.
We support the view that the oil price action does not represent the market’s participant’s sentiment that oil demand exceeds supply.
We support the idea that OPEC has overdone it with cutting supply and is now reaping the benefits of higher prices.
Technical Analysis of WTI Crude Oil
We start this analysis by noting that our previous 3 resistance levels (R1) $69.55, (R2) 70.50, (R3) $71.50 have all been broken in the previous sessions.
The commodity could be overtaken by a bullish movement causing it to move up towards the $74.50 (R1) resistance level and break it, moving further near the $75.50 (R2) resistance barrier.
We support the case that if a drawdown from the Crude Oil Inventories is realized on Thursday prices could move higher.
Further statements on OPEC planned output increase could create turbulence for the black gold market.
If Crude Oil enters a bear’s market, we could see it moving downwards towards the $72.60 (S1) Support level and even breach it aiming for the $71.60 (S2) Support hurdle.
Crude Oil could also be moving in a sideways movement between (R1) $74.50 resistance level and the $72.60 (S1) support level.
Trading activity is expected to be reduced on Wednesday due to the U.S. Independence Day holiday.
The EIA, which will be releasing its report a day later than usual because of the holiday, has so far reported three-consecutive weeks of hefty weekly declines in crude supplies.
Original Source: IronFX News