IGI Securities Limited – Commodity News

Karachi, March 22, 2019 (PPI-OT): Crude Oil

Technical

The WTI Crude Oil market has initially pulled back during the trading session yesterday, only to find buyers to push it to the upside. Ultimately, this is a market that should continue to see more momentum to the upside, but it’s going to take some time to build up confidence. Brent markets went back and forth during the day, perhaps lagging the WTI market a bit. However, it is still well above the 200 day EMA and of course the $67.50 level. This is a market that has shown the lot of bullish momentum, but it looks like the market is ready to continue to go much higher. The $70 level above should be a target, as it is the scene of a gap in the past. The market will try to fill that gap, but obviously it’s got some work to do. The market is currently trading inside this zone just above the 50% level at $59.63. The new short-term range is $54.87 to $60.39.

Highlights

Oil edged lower but held near 2019 highs, supported by a sharp tightening of global stocks

The Fed lowered its 2019 GDP view to 2.1% from 2.3% alongside a steeper drop for 2020 to 1.9%

The U.S oil market is no longer oversupplied, which should benefit WTI and result in further price convergence

U.S crude oil stocks are slightly below the five-year average

Crude prices have been pushed up by almost a third since the start of 2019 by supply cuts led by OPEC

Fundamentals

Oil hovered slightly below 2019 peaks today, propped up by ongoing supply cuts led by producer club OPEC and by U.S sanctions on Iran and Venezuela. U.S crude production returned to its record of 12.1 million bpd last week.

Brent crude oil futures were at $67.90 per barrel, 4 cents above their last close. Brent hit a four-month high of $68.69 per barrel the day before. U.S West Texas Intermediate futures were at $59.96 per barrel, down 2 cents from their last settlement.

Oil prices this year have been propped up by supply cuts by the Organization of the Petroleum Exporting Countries and non-affiliated allies such as Russia. Global economic growth still remains a concern.

Iranian crude oil shipments have averaged just over 1 million bpd in March, down from 1.3 million bpd in February and a 2018 peak of at least 2.5 million bpd in April. The average 1 million bpd in Iranian exports since November seems likely to fall further.

Venezuelan oil production has also dwindled amid U.S sanctions and an internal political and economic crisis, plunging from a high of more than 3 million bpd at the start of the century to just 1 million bpd.

Increasing exports, which have doubled over the past year to more than 3 million bpd. The International Energy Agency estimated that the United States would become a net crude oil exporter by 2021.

A nearly 10-million-barrel fall in U.S crude stocks last week, the largest drop since last July, boosted by strong export and refining demand, according to the U.S government’s Energy Information Administration.

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