wti crude oil market outlook analysis

The Oil market is currently being dominated by excess supply.

Fundamental news, keep excess at the center of the stage for the time being, but nothing remains constant when it comes to Oil glut and demand.

Through various reports, it was indicated that Russian oil output has hit top levels during December, surpassing the previous month.

Even though the Russian energy minister stated levels during the current month will reach October highs, output has been at a record high of 11.42 million barrels per day (bpd) in December, so far.

Russia’s oil production has been increasing through the years, thanks to new oilfields found.

This has been the case for the long run as it started after the 2008 world-wide financial crisis.

On other news, Qatar Petroleum, an ex-member of the OPEC group until very recently, is said to invest $20B in the United States during the next years.

Qatar’s chief executive also made it clear, the country is taking action in expanding its (LNG) liquefied natural Gas production boosting capacity in the next year.

Qatar’s annual production in liquefied natural Gas is 77 million tones and has plans of intensifying its production to increase it over 40% in the next 4 to 5 years.

As per Oil, Qatar pumps 4.8 million barrels of oil equivalent per day but targets to increase it to 6.5 million barrels in the next 8 years by expanding its business abroad.

It must be emphasized that, Oil companies operating in Qatar include Exxon Mobil Corp, Total, Royal Dutch Shell and ENI all internationally known and influential.

Regarding ENI, Qatar officials confirmed they were expanding their collaboration with the Italian Oil Giant, on three oil fields in Mexico, confirming Qatar’s attempt to increase its activities worldwide without the help of its previous team OPEC.

On Monday, comments from UAE energy minister that the Oil market is rebalancing, gave a small boost to Oil prices.

In the previous weeks, OPEC and its allies have decided to cut production by 1.2 million barrels per day (bpd) starting from January 2019, and further actions could be reviewed at a meeting in April.

Other news from the United States confirmed the energy services firm Baker Hughes said U.S. drillers reduced oil rigs in the previous week by 4, decreasing the total number of active rigs to 873.

However, the current U.S. rig count, which serves as an early indicator of future U.S. output, is higher than a year ago, which indicates supply has grown along with demand in the previous year.

From Asia, South Korea a known importer of Iranian oil in the past, has seemingly ceased oil purchases from Persia.

During the past 3 months South Korea has stopped purchases from Iran even though they have been given exemptions from the US on a 180 day basis.

It was said that South Korea has been replacing or could be replacing glut from places such as Qatar or Saudi Arabia.

Official data confirmed that the Saudi kingdoms crude oil exports in October rose to 7.700 million barrels per day from 7.433 million bpd in September, which does not come as a surprise to us.

The Saudis, have been selling more output at lower prices which covers for the opposite scenario of limited output at higher prices.

In addition, as we approach the end of the current year, the Oil market remains heavily over supplied.

Russia as indicated previously is producing at record levels along with the US which has increased production significantly in 2018 due to Shale Oil producers.

Russia and the US have managed to flood the market with glut, but also have managed to operate successfully matching supply with downsizing oil prices.

Keeping in mind that just in October, WTI prices reached just below $80 per barrel, the price action at the moment signifies that Oil importers around the world have many choices and opportunities to do business.

In our opinion, the future months could be different, as OPEC and Russia vowed to cut production next year making it clear that price action could be affected in the following months.

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WTI 1 Hour chart

During the past days WTI has broken below the psychological round number price of $50 per barrel and at the moment is trading in a sideways motion between our (R1) $47.35 resistance level and the (S1) $45.30 support level.

If the bearish momentum continues and the (S1) $45.30 support level is breached, then the next two levels on the downside are the $43.60 (S2) and $41.62 (S3) support levels.

In the opposite direction a bullish run could force the commodity to move above the (R1) $47.35 resistance level and aim for the $49.40 (R2) resistance barrier.

If the psychological round number price of $50 per barrel is upwardly breach then the next stop could be our (R3) $52.10 resistance hurdle.

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