WTI Crude Oil Market Outlook - High expectations end up with low prices

The market, blamed the drop on news regarding over supply, especially regarding 2019 and so, emotional traders jumped in and heavily sold the commodity, which dived and touched a new November low, leaving behind 6% of its value.

Taking a closer look, in order to examine whether oversupply could really be an issue in the following months, we have to go through some medium to long-term fundamental matters.

First, we would have to detail the US relationships with the Middle East.

Starting with Saudi Arabia, the US has been able to keep a stable relationship and cooperation with the Kingdom, even though the Jamal Khashoggi story has cut deep.

In other circumstances, the US could have fought its way through the matter, as we are talking about a US resident who could have been silenced for various geopolitical issues.

However, through various reports which we support, it was stated that the US is keeping the Saudi Arabia relationships on good terms, to protect its interests.

US president Donald Trump, stated in the past, he would like oil prices to be lower, but what would happen if ties with the kingdom were broken?

Most probably, Oil prices could spike upwardly and high oil prices have the effect of increasing inflation levels in the US.

At the same time, the US –Kingdom relationships have created over 500K Jobs in the US according to President Donald Trump which would also be a blow for the US.

However, in the upcoming OPEC plus meeting in Vienna December the 6th, the kingdom could be looking to cut production in the near future and could also be looking to influence Russia to follow this path, in order to create an even bigger influence and subsequent reaction to prices.

Moving on to Iran, even though its exports have dropped previously, we may see an increase in the following months as some Asian countries like Japan and South Korea could be restarting their imports from Persia, due to the waivers they were given by the US.

Furthermore, according to Reuters, the United States said on Tuesday it took action to discontinue an Iranian-Russian network which provided millions of barrels of oil to Syria and millions of dollars to fund military groups in Hamas and Hezbollah.

Iranian officials stated, the US cannot leave Iran shut out of the Oil industry.

No matter what is said, the waivers given to counties will be ended soon, and the issue could persist.

Iraq restarted exporting Oil from Kirkuk, as relationships between the OPEC participant and Kurdistan region improved.

The Oil production in Kirkuk had been seized due to political instability, but has now resumed its activities, adding approximately 50K bpd to global supply.

The US could be behind the bridging of the relationships, as it was stated that the Oil production in Kirkuk is aimed to cover for any losses in supply from Persia.

In the Mediterranean area, upgrades in refinery capacity have taken place, as Turkey, Algeria and Egypt are now improving their infrastructure.

Until now, these countries used nations like India for refinery purposes, but this could be discontinued in the near future, as the procedure could now be done in house, no longer requiring services from outside.

In the US, oil rigs increased by two compared to last week, indirectly sending the message supply could rise in the next weeks.

US Oil production has increased by almost a quarter this year and this could possibly continue until the end of 2018.

On the other hand, the Middle East remains a big question mark as to how they would deal with production but also with political turmoil between the countries.

Natural Gas

A short reference can be made on Natural Gas as the Commodity opened with a positive gap this week creating some interest in its industry developments.

Russia and Turkey have managed to finalize their project called TurkStream.

TurkStream is a natural gas pipeline running from the Russian Federation to Turkey.

On the other hand, in a meeting between US Secretary Mike Pompeo and Ukrainian Foreign Minister Pavlo Klimkin last Friday, it was emphasized that Europe should be able to diversify in Natural Gas supply being able to extract Gas from various sources.

Ukraine’s economic stability could be hurt from the further developments of the TurkStream pipeline.

The US stands beside Ukraine on the matter practically opposing Russia’s dominance in the Gas field.

Technical Analysis

WTI 4Hour Chart

Yesterday, the U.S. API Weekly Crude Oil Stock figure was released with a drawdown of -1.545M.

It must be noted that the last time a drawdown was released was in late October.

If the bearish momentum is continued for the commodity, we may see a clear breach of the (S1) 54.75 Support level and a drop even lower reaching for the (S2) 52.10 Support barrier.

On the contrary, if a bullish market overtakes the commodity, we may see WTI prices reaching the 56.15 (R1) resistance level and aiming even higher for the 58.30 (R2) resistance barrier.

Please note the EIA U.S. Weekly Crude Oil Inventories figure will be released today and a surplus of 2.9M is estimated.