wti crude oil market outlook analysis

Dispute between US-Venezuela

Dominating the headlines in the Oil market is the US-Venezuela recent dispute.

The US is not in line with Nicolas Maduro presidency calling his activities corrupt and illegitimate.

During the past days the matter has escalated further with the Trump administration enacted sanctions on Venezuelan government oil firm PDVSA.

Other reports stated PDVSA gave instructions to its clients with tankers waiting to load crude from Venezuelan ports, to prepay for any trade to take place or else they will not be provided with oil nor be given clearance to leave the port.

Even though the situation is getting out of hand and the matter may worsen, Oil prices have not been affected until now.

According to Saudi Arabia’s Energy Minister Khalid al-Falih the Venezuelan matter has not affected global oil markets adding also he did not see any reason to take additional measures on the oil market because of the situation.

However he did say an investigation on the matter could be performed in March-April.

Chinese Crude Oil Demand

Crude Oil demand in China was noted as picking up strongly as independent refiners rushed to buy before prices climb further from the low prices reached in the end of last year.

Chinese refineries are among the most impactful in the world because their incremental demand has catapulted China into the position as the world’s largest oil importer and so they can affect Oil prices significantly with their activities.

Moreover, Chinas oil import activities have the potential of rising to 9.5 million barrels per day (bpd) in 2019, increasing with an approximate 4% since 2018.

Comments from Saudi Energy minister

On other news, the Saudi Energy minister, in an interview with Bloomberg made some significant comments which in our opinion are worth mentioning, because they could be shedding some light on the future of the industry.

To start with, in a question if OPEC is aiming for a price range of 80 USD per barrel, the Saudi minister replied by saying we are not aiming for a specific price but rather bringing supply below demand for 2019.

He followed up by stating Saudi Arabia and similar minded countries will remain in line with the strategy they adopted since 2017, to control market supply hinting also that demand for the black gold is expected to pick up towards the end of the first quarter and entering the second quarter of 2019.

A review of the targets set, may be enacted and if action is required they will be most definitely making a move.

However he also kept a cautious view on Political instability regarding countries like Venezuela and Iran, stating the impact of both situations has not been evident yet.

The Saudi Energy minister said OPEC plus group had a limit of 10.33M barrels per day which had dropped to 10.2M (bpd) in the current January and could drop even lower in February to 10.1M (bpd).

US remains the largest producer worldwide

On another front, U.S. drillers added 10 oil rigs in the past week according to energy services firm Baker Hughes, which may have contributed to a downward pressure on oil prices on Monday.

We have confirming data that US will continue to expand crude production in 2019.

More significant could be the fact that, a counter action of OPEC plus group could shock prices even further.

Even though the US remains the largest producer worldwide, the OPEC plus group has equal influence on the commodity’s prices, and could interfere if the group decides to do so.

So we conclude on the fact that prices could be aiming to higher levels considering however the first half of 2019.

Crude Oil 4 Hour chart

On Mondays opening Crude Oil was under a bearish momentum moving downwards and breaking both our 53.04 (S1) and 52.26 (S2) support levels.

If the bearish momentum prevails then Crude Oil may move below the pre mentioned levels and land near the 51.55 (S3) support area.

On the upward, we see strong resistance at 53.75 (R1) which has been tested various times during the previous week.

If a bullish momentum is enacted we could see the commodity surpassing the 53.75 (R1) resistance level with the 54.43 (R2) and the 55.35 (R3) being next.

List of Forex Brokers