IGI Securities Limited – Commodity News

Karachi, March 07, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market fell quite a bit after the inventory numbers came out with a 7 million barrel build. However, it bounced significantly from the $55.50 level. That’s an area that has been massive support, and it looks like it is going to continue to go back and forth and it looks like the 50 day EMA underneath is also offering support but the 200 day EMA above is going to offer a significant amount of resistance. Brent markets were all over the place as well, showing signs of support at the $65 level underneath and resistance at the 200 day EMA above near $67.50. That being said, it looks like it is going back and forth in trying to decide whether it can break out to the upside. If it break down below the 50 day EMA, then the market probably goes down to the $60 level next. If it break out to the upside, the $70 level features a gap that needs to be filled.

Highlights

Crude oil futures were mixed yesterday after U.S government data showed an unexpectedly sharp build in crude inventories

The drop in gasoline supplies helped to offset pressure on crude-oil prices

A solid bearish build to crude inventories has been offset by some chunky draws to the products

OPEC and its partners have pledged to curb output by 1.2 million bpd

Gasoline stocks, however, fell 4.2 million barrels, compared with expectations for a 2.1 million-barrel drop

Fundamentals

Oil edged up today amid ongoing OPEC-led supply cuts and U.S sanctions against exporters Venezuela and Iran, although prices were prevented from rising further by record U.S crude output and rising commercial fuel inventories.

U.S West Texas Intermediate crude oil futures were at $56.45 per barrel, up 23 cents, or 0.4 percent, from their last settlement. Brent crude futures were at $66.36 per barrel, up 37 cents, or 0.6 percent.

Prices are being supported by efforts led by the OPEC and other countries, a grouping known as OPEC+ to withhold around 1.2 million barrels per day, a strategy designed to tighten markets.

OPEC’s strategy is to rebalance the market as quickly as possible and exit the cuts by the end of June in order to grow production alongside shale producers in the second half of this year.

U.S sanctions against the oil industries of OPEC members Iran and Venezuela have also had an impact. Despite these factors, oil remains in plentiful supply thanks to surging U.S production.

U.S crude oil stockpiles rose much more than expected last week, with inventories up by 7.1 million barrels to 452.93 million barrels, according to a weekly report by the U.S Energy Information Administration.

Meanwhile U.S crude oil production remained at a record 12.1 million bpd, an increase of more than 2 million bpd since early 2018. The balance between rising U.S production and the OPEC+ efforts to stabilize prices with a production cut was broken by higher than expected U.S inventories.

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