IGI Securities Limited – Commodity News

Karachi, June 20, 2018 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market has been noisy yesterday, losing 1.5% right off the bat. The market still has plenty of support underneath though based upon the uptrend line, and it will break down below there before it get some type of resolution from the OPEC meeting. However, if it did break down below that uptrend line ahead of time, that would be a very negative sign. In the meantime, it anticipate that the next couple of days will be very back and forth as it has seen already this week. Brent markets have been very noisy during the trading session as well, gapping lower at the open. The $75 level seems to be a bit of a fulcrum for price, and it will continue to dance around this level in the market. It is simply a function of the markets waiting for clarity from OPEC, but it would point out that there is a lot of noise above that could continue to offer resistance.

Highlights

Oil prices rose today, supported by a drop in U.S commercial crude inventories

OPEC-members, including Iran are against such a move, fearing a sharp slump in prices

OPEC would agree to pump more oil, probably a fairly modest 300,000-600,000 barrels per day, or only around 0.5 percent of total world production

Oil investors continued to weigh potential outcomes for a meeting of major oil producers later this week

A drop in commercial crude inventories reported by the API were cited as supporting oil prices

Fundamentals

Oil prices rose today, supported by a drop in U.S commercial crude inventories and the loss of storage capacity in Libya, with investors cautious ahead of a biannual meeting of OPEC exporters to decide production policy. A 25 percent tariff on U.S crude oil imports, as threatened by China in retaliation for duties Washington has announced but not yet implemented against Chinese products.

Benchmark Brent crude was up 70 cents at $75.78 a barrel. U.S light crude was 60 cents higher at $65.67. U.S crude inventories fell by 3 million barrels to 430.6 million barrels in the week to June 15, according to an American Petroleum Institute report yesterday.

WTI is more vulnerable to spill over from today’s hard selloff in global equities than is Brent as the differential between the two benchmarks has stretched back to above $10 per barrel.

Brent is being relatively supported this week by increasing concerns over lost Libyan supply in which as much as 400,000 barrels per day of output has been impacted by an attack on two key terminals.

On Friday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies are set to meet in Vienna, where they are expected to update their 2017 supply withholding agreement.

Expectations are growing that OPEC and partner Russia will increase production in order to make up for output declines in Venezuela and potential shortfalls from Iran, which is facing renewed U.S sanctions.

Russia and Saudi Arabia are pushing for a steep production increase, with Russian Energy Minister Alexander Novak saying he wanted to raise output by 1.5 million barrels per day (bpd).

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