IGI Securities Limited – Commodity News

Karachi, December 11, 2017 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market fell significantly during the week, but found enough support near the $56 level to turn around and form a hammer. The hammer sits at the $57.50 level, and that suggests that we are going to continue to find the reasons to go higher, perhaps reaching towards the $60 handle underneath. That’s an area that continues to offer a lot of resistance though, so I think it’s going to take a certain amount of bullish momentum and perhaps a few catalysts that we are not aware of to break out. Nonetheless, it does look like the momentum is with the buyers, so one would have to think it is certainly possible. It’s probably easier to trade this market from a short-term perspective though. Brent markets look very much the same, initially pulling back during the week but forming a massive hammer sitting just below the $64 level. I think we are going to break out.

Highlights

Crude edged higher on Friday as Chinese orders for foreign crude signalled stronger demand in the world’s second-largest economy.

Futures climbed 1.2 percent in Friday’s trading session

Everyone is talking about that big jump in imports of crude into China last month

Drillers expanded the number of rigs searching for crude in two of the busiest U.S. shale fields this week

West Texas Intermediate for January delivery climbed 67 cents to settle at $57.36 a barrel

Fundamentals

Oil markets edged lower today as ongoing output cuts led by OPEC were countered by rising U.S. drilling activity that points to a further increase in American production.

U.S West Texas Intermediate (WTI) crude futures were at $57.03 a barrel, down 33 cents from their last settlement. Brent crude futures, the international benchmark for oil prices, were 15 cents lower at $63.25 a barrel.

Both Brent and WTI crude oil settled more than 1 percent higher on Friday, and oil prices have gained well over a third in value from their 2017 lows. It’s time for a breather.

The gains are largely due to production cuts by the Organization of the Petroleum Exporting Countries and a group of non-OPEC producers, including Russia, which have been in place since the start of the year.

But analysts said the effect of these cuts could be undermined by rising output from the United States, which is not participating in the deal to voluntarily withhold production.

The number of rigs drilling for new oil output in the United States rose by two in the week to Dec. 8, to 751, the highest level since September, General Electric Co’s Baker Hughes energy services firm said on Friday.

The largest concern for investors currently remains the rise in the U.S. rig count, which could potentially jeopardize the OPEC and Russian agreement when they meet for a review in June 2018.

A higher rig count points to a further rise in U.S. crude production, which is already up by more than 15 percent since mid-2016 to 9.71 million barrels per day (bpd). That’s the highest level since the early 1970s, and close to levels from top producers Russia and Saudi Arabia.

You May Also Like