Date: 21 Nov 2018

Yesterday, President Donald Trump said that he would like to see oil prices lower in a tweet before the cartel meeting with other oil producers and added that Saudi Arabia has helped oil prices down.

Ministers from the Organization of the Petroleum Exporting Countries (OPEC) are scheduled to meet in Vienna on December 6 and 7 to decide on production policy for the next six months.

Saudi Arabia, OPEC’s de facto leader, wants the cartel to reduce production by about 1.4 million barrels per day (bpd), according to recent reports, while other oil producers also considered reductions in supply heading into next year.

Also weighing on oil prices are concerns about rising global supplies and growing fears of an economic slowdown.

American Petroleum Institute (API) reported yesterday its weekly statistical bulletin (WSB), which revealed a drop to -1.545 million in crude oil stocks compared to last week number of 8.790 million barrels. This decline may suggest an increase in demand, which might give some support to the oil price or at least halt the current downward move.

In the meantime, markets remain cautious on the US Energy Information Administration (EIA) report on crude inventories due today, following last week’s number of 10.270 million barrels, up for an eighth straight week, while US production rose to another record. Today, we will have the release of EIA latest survey the report and is expected to show a drop in crude oil stocks with estimates at 2.500 million barrels.

The API data is often seen as a prelude to the EIA data, as it is released the evening before the EIA report. There is definitely a relationship between the two data sets: 80% of the time the data is directionally aligned.

Meanwhile, according to the last data from energy Services Company Baker Hughes released on November 16th, the average number of US oil-drilling rigs rose to 888 comparing to the 886 released on November 9th, US energy firms added oil rigs for a fifth time in six weeks, keeping the rig count at its highest in over three years. This rig count is an important business indicator for the oil drilling industry and acts as a leading indicator of demand for oil products.

Since the beginning of 2018 until last Tuesday close, the crude oil remains negative with a loss of more than 11.0% but since the start of November, the commodity dropped in excess of 17.8%. Nonetheless, the weekly outlook remains with a loss of more than 6.0% and on the daily basis closed deep in the red with almost 7.0% loss. Furthermore, crude oil remains in a distribution phase since late-October.

On yesterday session, crude oil dived with a wide range and closed near the low of the day, in addition, managed to close below Mondays’ low, which suggests a strong bearish momentum.

The stochastic is showing an oversold market but is still displaying bearish momentum.

The commodity continues under pressure making lower highs and lower lows signs of a well-established bearish trend. In Mid-November, the crude oil the made a new year-to-date low at 54.89 before bouncing from a daily support and kick-starting an upward correction. Now the commodity made a fresh year-to-date low at 52.76 and breached a strong daily support that is in the confluence of the 2014 low and 2016 high both key pivot levels. Since mid-October, the rice does not have the strength to close above the 10-day moving average, which is acting as a dynamic resistance. Therefore, until the crude oil manages to close above the 10-day moving average it should carry on with the bearish trend.

LCrude is a CFD written over Light Crude futures.

 

LCrude Jan ’19 Daily Candlestick Chart

LCrude Jan ’19 Daily Candlestick Chart

 

Watch out this  Week:

 

On Friday at 13:00 GMT (8:00 AM ET) the Baker Hughes will release weekly data on the US oil rig count. An increase in the oil rig count is seen as having a potential negative impact on crude oil price because it is perceived as a likely increase in crude oil inventories if demand does not pick up.

 

Written by Hugo O’Neill, External Analyst

 

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