For the fifth consecutive week, U.S. crude oil Inventories mounted and surpassed its previous weekly count, while seasonal maintenance kicked in at the same time.
Weekly U.S. crude production edged higher to 3.7 million barrels reaching a record total of 12 million barrels per day, the data indicated as the shale revolution surges, lifting America above Saudi Arabia and Russia as the world’s biggest producer.
Oil prices showed their vulnerability to the news in the Asian session by losing some ground and dropping.
Generally, in the mid to long term oil prices could be negatively affected by the increased production from the US, due to supply being over exceeded and making the precious commodity even cheaper.
The above mentioned news confirms that the US will continue to pump oil promptly and swiftly in the following months.
The technology and the infrastructure of Oil production in the US is far more developed than its competitors and enables it to produce cost efficiently, above all.
Aggressive supply cuts from OPEC plus group
Even though, starting February, Crude Oil prices looked uncertain to the direction the trend would follow, the commodity appreciated in value due to aggressive supply cuts confirmed from the OPEC plus group.
Yet, this week evidence that the U.S. and China want to resolve their trade dispute has given some optimism to Oil traders.
We must note that Saudi Arabia has said it expects oil markets to balance by April, as they are working closely to offset record-breaking American production.
Saudi Arabian crown prince investing in China
Saudi Aramco is said to be taking further steps in its investing plans aiming at two oil refining and petrochemical complexes in China.
The Saudi Arabian crown prince was in China this week and could be looking at other opportunities also.
In more detail, the plan is set for Aramco, to sign a memorandum of understanding (MOU) to construct a refinery and petrochemical project in the northeastern Chinese province of Liaoning, forming a special agreement with China’s defense conglomerate Norinco.
All these actions taken by Aramco could be viewed as an attempt for Saudi Arabia regain its place as the head oil exporter to China, which had been overtaken by Russia for the past three years.
This is a small part of the Saudi Arabian Oil giant Aramco, to spread its activities all over the world as we saw it invest in natural gas firms in the US and is said to increase even further as the kingdom has pledged $20 billion of investment in Pakistan and sought additional investment in India’s refining industry.
Venezuela imports Fuel from Russia and Europe
On other news, Venezuela has been forced to turn to Russia and Europe for fuel imports taking on higher premiums, after flows from the United States dried up because of sanctions.
Even though Venezuela produces oil, it is exporting its crude for the time being, due to a holdback on refineries rehabilitation also amid the US sanctions.
So, the Latin American country seeks to import gasoline and diesel for petrol stations and power plants, as well as naphtha to dilute its heavy oil.
From the time when the US imposed fresh sanctions on Venezuela in late January, products supplies have mainly come from Russian state oil major Rosneft, Spain’s Repsol, India’s Reliance Industries RELI.NS and trading houses Vitol and Trafigura, according to sources and vessel-tracking data.
In a Reuters report it was written that ship-owners were now adding a fee of up to 50 cents per barrel to Venezuela versus 15-20 cents before sanctions.
Monthly supplies varied from month to month but in December alone state run PDVSA imported nearly 300,000 barrels per day of fuel.
However, imports dropped to about 140,000 bpd of gasoline, and other fuels since the end of January, Refinitiv Eikon data shows.
To come to a conclusion, we have noted bullish tendencies from Oil traders on the outlook for prices, betting that Saudi Arabia will do whatever it takes to tighten the market even if consumption growth slows, helped by U.S. sanctions on Iran and Venezuela.
Oil Market Technical Outlook
In a bullish run we could see Crude Oil move above the 58.49 (R1) resistance level aiming for the 60.30 (R2) resistance barrier.
Even higher could be the 61.55 (R3) resistance level.
In the opposite direction Crude oil could drop below the 56.52 (S1) support level aiming lower for the54.82 (S2) support barrier.
Even lower is the 53.93 (S3) level.
For the time being the commodity has stabilized between the 58.49 (R1) resistance level and the 56.52 (S1) support level.