IGI Securities Limited – Commodity News

Karachi, March 11, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market fell during the trading session on Friday after the jobs number came out. It crushed the $55 level of support and reached all the way down to the 50 day EMA. Since then, the market has stabilized a bit, but really at this point one would have to look at this as a severe test of the willingness of buyers to come in. Brent of course did the same thing, reaching down towards the 50 day EMA and the $64 level. This is a market that looks likely to roll over as well, perhaps down to the $62.50 level where a lot of clustering. Any rally at this point should be looked at with suspicion until it can break above the 200 day EMA on a daily close. That would be roughly $67.50, which is something that it been trying to do a week, and quite frankly now that it has some momentum it’s in the opposite direction so that makes it much less likely.

Highlights

U.S crude output has rocketed to more than 12 million barrels a day

OPEC and non-OPEC members, including major producer Russia, had agreed to cut a combined 1.2 million b/d in supplies for six months

This is the third straight week of decline, after a number of oil producers trimmed their spending outlooks for 2019

The oil rig count is still 38 above year-ago levels, it was down more than 6%

Downward revisions in global growth forecasts by OECD and ECB have capped bullish gains

Fundamentals

Oil prices rose today, lifted by comments from Saudi oil minister Khalid al-Falih that an end to OPEC-led supply cuts was unlikely before June and a report showing a fall U.S drilling activity.

U.S West Texas Intermediate crude oil futures were at $56.39 per barrel, up 32 cents, or 0.6 percent from their last close. Brent crude futures were at $65.04 per barrel, up 30 cents, or 0.5 percent.

Oil markets have generally been supported this year by ongoing supply cuts led by the Organization of the Petroleum Exporting Countries and some non-affiliated allies like Russia known as the OPEC+ alliance.

OPEC+ has pledged to cut 1.2 million barrels per day in crude supply since the start of the year to tighten markets and prop up prices. The group will meet in Vienna on April 17-18, with another gathering scheduled for June 25-26, to discuss supply policy.

Prices were also supported by U.S energy services firm Baker Hughes’ latest weekly report showing the number of rigs drilling for new oil production in the United States fell by nine to 834.

High drilling activity last year resulted in a more than 2 million bpd rise in production, to 12.1 million bpd reached this February, making the US the world’s biggest producer of crude oil ahead of Russia and Saudi Arabia.

The slowdown in drilling points to more timid output growth going forward, but because the overall drilling level remains relatively high despite the recent decline, many analysts still expect U.S crude output to rise above 13 million bpd soon.

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