Crude Oil Forecast and Technical Analysis: Week 18-22 Feb
Crude Oil prices ended the week 3 months record high. Crude Oil March contracts ended at 55.73 above our short term target 55.47.
Despite the negative EIA Inventories Data and the bearish report from the IEA that warned of considerable production capacity from non-OPEC members, Crude Oil prices continue its rally.
Oil posted sizable gains this week, with ongoing outages in Venezuela tightening the market. Also, one of the largest bearish factors for oil – the U.S.-China trade war – showed some signs of easing.
A better than expected data from China helped the Crude Bulls.
OPEC Supply Cuts is accelerating the bullish move as well.
World’s Largest Offshore Oil Field Partially Shut Down
The Safaniyah oil field in Saudi Arabia—the world’s largest—is producing at reduced capacity after a ship’s anchor cut the main power cable, Reuters reports citing a knowledgeable source. An earlier report from MarketWatch quoted information from Energy Intelligence suggesting production at the filed had completely stopped, sparking worry about global heavy oil supply.
Above was the supply part of the Crude’s bullish move of the last week.
What about the demand?
The report sent warnings from the EIA and OPEC, also closely watched crude forecasting agencies. With all three sounding off on a seemingly bearish development, the outlook for the week ahead will reflect as such.
Both the IEA and EIA have forecasted a decrease in crude demand for 2019 while OPEC envisions no change from 2018.
The U.S Production:
Baker Hughes reported an increase in the number of active oil and gas rigs in the United States this week.
The total number of active oil and gas drilling rigs rose by 2 rigs, according to the report, with the number of active oil rigs increasing by 3 to reach 857 and the number of gas rigs decreasing by 1 to reach 194.
The EIA’s estimates for US production for the week ending February 8 shows that US producers are holding their production rates fast at an average rate of 11.9 million bpd—a record for the US—for the fifth week in a row.
The Energy Information Administration says a new swell of U.S. light oil is headed to the market, boosted by technology to unlock production from shale formations.
Those efforts could add 1.45 million barrels per day to U.S. production this year, bringing output to a record 12.41 million bpd. Next year’s output could go up by a further 790,000 bpd to a new all-time high of 13.2 million bpd.
IEA warns on quality differences. The IEA said in its latest Oil Market Report that the dwindling supplies of medium and heavy barrels, at a time when light sweet oil is surging from U.S. shale, has disrupted both the crude and product markets. Medium and heavy losses from Iran, Venezuela, Mexico and limited midstream capacity restraining growth in Canada has all combined to put a premium on those barrels. As a result, refiners could face some challenges this year as they search for the right type of crude for their facilities.
Another factor of the Friday’s rally can be the declining DXY.
What is next?
Considering OPEC to stick on the cuts, there are no bearish signs on the supply side. But the U.S. production can have a negative effect on the prices.
Global Growth concerns add weights on the prices. And if the trade talks optimism fades away, Crude Oil’s rally may come to an end quickly. As a brief, the demand side of the story is not offering a happy end.
56.25 is the key historical level and stands as strong resistance. Markets will look for stronger fundamentals to continue buying above 56.25. ( Deeper decline in DXY, solved US-China trade wars…)
Under the current fundamentals, we predict the prices to face selling pressure at 56.25-57.25 region.
Any fresh intraday or short term trade opportunity will be published for the members.
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Crude Oil: Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility