wti crude oil market outlook analysis

In the previous days Saudi Arabia said that various attacks were placed on some Oil pumping stations, two days after two Oil tankers were sabotaged near the UEA.

Many believe this was a minor attack placed from Iranian forces displaying their frustration on the measures the US has taken against their country.

Moreover, the relations between the Kingdom and Iran have also been in a decline due to the Saudis dominance and Iran’s uncompromising stance towards the group they both belong to called OPEC.

Even though no significant reaction was observed on Oil prices on the news, the matter has the potential of creating a geopolitical storm especially if the US intervenes militarily.

Demand for oil is higher than expected

Moving to OPEC, with the Oil cartel officials making some comments on its future expectations from the Oil market as per demand and supply.

The group affirmed that demand for its oil would be higher than expected this year due to supply decline from countries including the US, kicking in.

In our opinion, a lot of pressure is now placed on the OPEC plus group which meets in June on whether it will remain in its current course of cutting down on barrels or move into producing more of the commodity.

OPEC, Russia and other non-member producers have already been reducing output by 1.2 million barrels per day (bpd) since January 2019 for six months.

Prices have been somewhat stable throughout the past months yet, breaking below significant price levels could lead the Oil industry back to square one, were price levels were very low.

On this idea we place some doubt whether OPEC plus is ready to increase production and change course.

Yet with countries that are under producing for any reason, like Iran or Venezuela plus declining stocks from the US, they may be forced to make adjustments to available Oil.

We believe for the time being they are monitoring if supply is really necessary, rather than if to increase or not.

OPEC officials previously stated this will be the criteria they will use in order to increase production.

For the time being, OPEC achieved 150 percent compliance with its strategy to cut production in April, according to a Reuter’s calculation, compared with 155 percent initially reported in March while its April output decreased by 3,000 bpd month-on-month to 30.031 million bpd.

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Saudi Aramco to increase Oil Supply to Europe

On other news, Saudi Aramco has seemingly set a new goal for the next years.

Aramco now is aiming to increase its oil supply to Europe by 300,000 barrels per day (bpd) within the next two years.

We have noted in previous reports that Aramco is making global moves to expand its productivity and services, so the news is not much of surprise to us.

Yet Aramco, the world’s biggest oil producer could be seen operating in every continent of the world in the next years as it has been announcing deals for some time now.

Now, Aramco officials are pretty confident they will be moving in new territory in the sector of down streaming their Oil and refining, announcing Europe and the Mediterranean countries as their next collaboration.

It will be interesting to see what the limits are for Aramco, as it has been singing big deals in a row and still looks ready for more.

U.S. output manages exports from Iran and Venezuela

Other information could be consider contradicting but is worth mentioning.

According to IEA the International Energy Agency global demand may not be dependent on OPEC to cover for any losses created after all.

They claim that U.S. output will manage to balance falling exports from Iran and Venezuela.

The IEA said reduced rig counts and maintenance in the Gulf of Mexico had affected U.S. output in the first half of the year.

Yet the increasing drilling permits and advance extraction methods which have been updated would lift output shortly.

Oil Market Technical Outlook

In the latest sessions WTI has stabilized nearby our (S1) 61.55 support level.

Yet if the (S1) 61.55 support level is broken in a downward trend the next level could be the (S2) 60.30 support level or even lower the (S3) 58.50 support line.

In an upward momentum, we may see the commodity breaking above the (R1) 63.10 resistance line and aim for the (R2) 64.70 resistance barrier.

Even higher is the 66.60 resistance line.

Please note the forecast for the upcoming EIA weekly reading is at -0.8M.

If the forecast is realized we could see WTI getting some support as this would be the second consecutive drawdown in a row.

Please note this outcome is based on the respected forecasts.

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