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

All the headlines in news articles and televised shows emphasized the fact that Iran Sanctions could hurt the balance of demand and supply but numbers and statistics indicated the opposite.

EIA as well as API have shown Oil surpluses arising from higher production and increased supply for some weeks now and have eventually turned Oil prices into a rolling avalanche.

The downfall of Crude oil prices which is now compared to the commodities price collapse back in 2014 and until now has lost over a quarter of its value since early October.

OPEC is now taking actions to offset this situation as it is far below its desired prices.

On Tuesday, OPEC publicized a willingness to cut oil output when it meets next month.

Analysts stated that OPEC’s proposal was based on new fears that a supply glut could appear in 2019 as the world economy slows and rivals increase production more quickly than expected.

However, in its monthly report, OPEC estimated world oil demand next year would rise by 1.29 million barrels per day (bpd).

The prediction indicates 70,000 bpd less than last month’s forecast and the fourth consecutive estimate cut.

Output, however, rose by 127,000 bpd to 32.9 million bpd.

Moreover, today it was publicized that OPEC and its partners are proposing to cut oil output by up to 1.4 million barrels per day for 2019.

This is an aggressive measure that indirectly states that the Organization of the Petroleum Exporting Countries is trying to control rising supplies, thus is considering reducing production just months after increasing it.

OPECs group meets on December the 6th and will shed light on its plans for 2019.

Very significant was to us the fact that Russia and Saudi Arabia were not on the same page, as the two major Oil producers gave separate and different signals, as to their future plans.

Russia, through its Energy minister Alexander Novak showed some uncertainty if a production cut is desirable at the moment.

While Saudi Arabia pointed at a production cut as indicated above.

It could be the case that, for the first time this year the two countries are in different business circumstances and there may be economic interests behind this matter.

Overall, OPEC could develop a plan to bring Oil prices higher as it has managed greatly during the past 10 months in 2018.

Iran is still shipping Oil to countries even though it has seen a reduction in its Oil exports.

Analysts believe Iran’s exports could rise in November and December as countries that have been temporary exempt with waivers like China and India may continue using this allowance until the end of the period given.

Iran started selling oil to private companies for export in late October, just before the U.S. sanctions commenced.

According to Reuters, during the past weekend Iran sold 700,000 barrels of crude oil to private companies.

These sales are aimed towards offsetting the impact of the U.S. sanctions on the country’s exports.

In China, October refinery activities increased to the second highest on record for any month on a daily basis confirmed by official data.

Refiners ramped up production due to the opportunity from strong margins for gasoline and diesel arising.

That increase activity has so far come across healthy demand, not only in Asia’s main emerging economies of China and India, but also in Japan and South Korea.

If the situation persists then the rising supplies are threatening to turn into piles of stock excess.

As a conclusion the Oil market remains rather unpredictable with 2018 coming to an end, while for 2019, major changes interfering with demand and supply, are still pending.

Crude Oil 1 Hour Chart

Crude Oil opened with a positive gap on Monday but has followed up with a bearish trend in the following days until now.

If the bearish movement is to continue we could see the commodity dropping towards the (S1) 53.87 support line and even breaching with the next stop being the (S2) 50.96 support barrier.

If the momentum is switched to a bullish movement we could see a jump to the (R1) 58.29 resistance level and even a move higher for the (R2) 60.21 Support level.

If the psychological threshold of 60 USD per barrel is breached then the next step could be the (R3) 61.78 Resistance level.