wti crude oil market outlook analysis

This week’s Oil outlook provides new information coming from all over the world that could seemingly reverse the Oil markets selling sentiment and could be hinting the start of a new period with major changes.

Starting with the OPEC plus group, notable action has been taken that indicates the Oil producers team is looking to turn things around as we enter the first quarter of 2019.

According to Reuters, OPEC Oil supply dropped in December by the biggest volume in almost two years and is the largest month-on-month decline since January 2017.

Starting with the most significant producer in OPEC, Saudi Arabia enacted the largest supply cut of the group, totaling 400,000 barrels per day.

We must take a note of the kingdoms intentions to intensify production cuts during January, by carrying out a larger cut than required under the OPEC plus deal.

The second-biggest supply cut quite surprisingly came from the United Arab Emirates.

The source noted that both the Saudi Kingdom and the United Arab Emirates had willingly cut production supply.

On the contrary and also surprisingly Iraq increased its output and sent 295,000 bpd to the United States, increasing by 140,000 bpd compared to November.

Furthermore, shipments from Venezuela also increased by 22,738 bpd.

In total, it is estimated that OPEC pumped 32.68 million in December, reducing its output by 460,000 bpd compared to the previous month.

Moreover, while OPEC is confirmed to cut production in January, market participants could be interested in further output declines in order to form a mid to long term opinion on Oil price direction.

Then again, global Slowdown worries could also be affecting OPEC and its decisions, and so caution could remain in focus.

Regarding the US, some decrease in Oil import appetite was confirmed in December.

Oil cargoes sent from OPEC nations to the United States dropped to 1.63 million barrels per day (bpd) during the past month, down from 1.80 million bpd in November.

Analysts cited the growing U.S. shale production and the increasing excess supply in the US, as the reason for a decreased demand for imported crude.

We go even further on the matter and stress worries that the OPEC plus group may not be cutting enough production needed to counter the ever increasing shale oil driller’s activities in America.

This may force OPEC to take further action if prices do not return to desirable levels.

Yesterday, a survey released by the Federal Reserve Bank of Dallas, may have shed vital information for the future months regarding the US oil market.

A survey of executive sentiment showed a drop to -10 from 47 in the prior quarter, the first negative reading since early 2016 while the executives are using a price of $50 to $64.99 per barrel for future arrangements.

Another interesting outcome was the service firms, which handle drilling in the oil field, had a more bearish outlook than exploration and production firms.

Approximately 60 percent of services firms stated greater uncertainty and more than half of executives said they expect decreased capital spending in 2019.

WTI Cash 1 Hour chart

In the above chart, Crude Oil has evidently been moving higher since Monday, when the commodity opened below the 46.15 (S1) support level.

It has now reached but not breached our 48.00 (R1) resistance level, confirming some bullish sentiment.

If the black gold is to move even higher, then the next level could be our 50.00 (R2) resistance level and then the 51.55 (R3) resistance barrier.

On the contrary, a bearish scenario could mean a downward breach of our 46.15 (S1) support level aiming for the 44.44 (S2) support level.