June 6, 2018

IronFX, WTI Market Outlook - Is Crude Oil playing the manipulation game?

What’s happening in WTI Crude Oil market recently? and What is the current/future trend?

This article is originally referred from IronFX News.

The most recent headlines in the Oil market, are regarding unofficial requests from the United States government towards Saudi Arabia and some other OPEC producers to increase Oil supply.

OPEC producers along with Russia have not stated clearly their intentions to increase oil supply or the opposite, oil production cuts in the near future.

They have made some statements using words like we could or is to be considered in adding supply, with no conclusion reached and the OPEC June meeting in Vienna is getting closer.

The most significant part of the whole situation is that even though nothing has been confirmed from oil producers, the noise coming from these headlines has increased volatility for the black gold and has managed to plunge prices knocking crude oil below the $70 p/b level.

White house representatives and participants of the National Security Council have been positive towards any action, giving them access to more oil.

Also, President of the US Donald Trump has also stated that he is not a fan of high oil prices.

In our opinion, the US is clearly making efforts to reduce oil prices.

Furthermore, as per various sources stated, estimates of an increase in supply by OPEC and Russia have set the benchmark of adding 1M barrels per day.

On the other hand, no guarantee is in place that OPEC and its allies will follow up on these supply additions.

Crude Oil has currently dropped to $65.50 p/b and previous OPEC price targets were between $70 – $80.

On Tuesday, Russian Energy Minister Alexander Novak stated that oil demand should shape OPEC and non-OPEC countries adjustments on oil output curbs.

Moreover, on OPEC’s official website it was confirmed on a report released on the 25th of May that OPEC and non-OPEC producing countries have accomplished a very high conformity level demonstrating the commitment of the organization to the restoration of market stability, which was set in place to serve the long term interests of producers.

The above-mentioned statement is in contrast with what the US has unofficially requested as the outcomes could be somewhat uncertain instead of keeping the market in control.

On another point, as per this week, it must be noted that U.S. crude inventories fell by 2 million barrels, compared with analyst expectations for a decrease of 1.8 million barrels, American Petroleum Institute data showed after Tuesday’s settlement.

This could be a factor for an increased demand, however it remains to be proven with Wednesdays EIA figure to be released.

Situation in Venezuela

On a separate note, Oil prices have been receiving support from unstable circumstances in Venezuela.

Venezuela indicated a potential of halting some crude exports tightening even further global Oil supply.

Venezuela’s state-owned oil firm PDVSA has noted to its clients that it will only distribute Oil via a Ship to ship transfer.

It is our opinion that this is negative news for the Latin American countries oil production and we see the case for a further decrease on exports to follow up.

Negativity was confirmed immediately by customers and it must be noted that additional costs are associated with the action on behalf of the buyer.

As a conclusion, oil prices have pulled back sharply from $72 to around $66, but that is taking place within the environment of a well-established uptrend as per the American Petroleum Institute data showed larger than expected draw in US crude inventory releasing a -2.0M drawdown.

Technical Analysis on WTI Crude Oil

Our first observation, is the long-term support level near $65. That acted as a resistance level in January and again in March.

Oil has a well-established pattern of moving in trading bands.

Crude Oil could show its sensitivity on the upcoming EIA crude oil news today with a forecast of -1.8M to be released.

If this figure is actually released we could see crude oil moving upwards towards the $66.13 (R1) resistance level and even breach it aiming for the $67.20 (R2) resistance hurdle .

If the forecast is to be rebutted, and the figure comes out to be positive (injection) the commodity could be overtaken by a bearish movement causing it to move down towards the $64.95 (S1) Support level and break it, moving further near the $63.26 (S2) Support barrier.

Further news regarding the Iranian sanctions could also provide support to Oil prices as the matter is somewhat unfinished and uncertain as per the outcome.

Crude Oil Daily Chart

Original Source: IronFX News

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