Traditionally, in January many financial forecast reports are released for the year ahead, and if we are speaking on Oil output and demand, the market sparks great interest.
Even though, all these forecasts are just numbers which are based on various facts and previous performance, reality most of the time is much more difficult to predict and so we maintain some uncertainty as to the reliability of these expectations.
During the previous days, the U.S. Energy Information Administration stepped in to increase its 2019 global Oil demand estimate by 20,000 barrels per day, in comparison to its prior estimate.
Not such a significant change, as big countries usually deal with millions of barrels per day but it does indicate some new interest.
The report goes on stating US WTI production could rise to surpass 12 million barrels per day (bpd) in 2019 and to climb to nearly 13 million bpd in 2020.
On other new, Japanese Oil purchasers are expected to restart business with Iran.
Back in November 2018, Japan stated it would make use of exemptions provided by the US to keep up imports from the Middle Eastern nation.
The two countries appear to be in a positive partnership for them to maintain ties despite the strong resentment the US put on Iran in previous months.
For the Japanese side to stay in business with Iran, it must be given some kind of advantage in the bargain deal they keep which is also indirectly saying Iran gives its buyers better offers than other producers.
According to Japanese trade minister Hiroshige Seko, it’s up to private companies to maintain their Oil trading with Iran.
Iran plans to counter US sanctions with private company oil trading and this is a strategy that could be used even more in 2019 by the Persians.
We must note here that during the previous week the US State representative regarding Iran, announced that the US will not be giving further exemptions to countries associated with Iranian Oil trade.
On the OPEC front, the Saudi Arabian Energy Minister said that oil demand continues to be solid and that further action could be taken if demand levels are changed.
He also stated that there was no influence observed from the U.S.-China trade conflict.
Very clearly the OPEC plus group is taking action in order to offset rising American output.
This plan targets to bring global supplies to balanced averages and increase confidence, while eventually setting the precious commodity prices into a more bullish territory.
On the other hand, the US shale Oil producers may be having the exact opposite scenario in mind as per supply.
The US Oil production has the potential of pumping huge Oil gluts, as they could be satisfied with a lower price range near the 55 to 60 USD per barrel as opposed to the 70-80 USD per barrel OPEC is comfortable with.
The question here is clearly who can identify and approach the suitable purchaser in order to push the Oil in the right direction.
For the year ahead and from a purchaser’s perspective, we see the Asian market as ever growing for Oil demand and the most dominant.
As a conclusion the EIA expects that oil prices will remain lower than during most of 2018 were the average was at 65 USD per barrel.
This opinion, we also share as the competition between OPEC plus and the US could continue for the next years.
However, in early 2019 demand growth may also be a factor to keep in mind that could keep the industry on its toes and adjustments may take place.
Until now in January 2019 most of Crude Oil price action has been between our 52.26 (R2) resistance level and our 50.75 (S1) Support barrier.
However due to the last hour drop a new resistance level has been formed at 51.55 (R1).
So in a straight line ascending the key levels for a bullish run is the 50.75 (R1) resistance barrier, then the 52.26 (R2) resistance level and then the 53.04 (R3) resistance area.
On the bearish side a drop aiming for the 50.75 (S1) support level could mean that the next line maybe the 50.00 (S2) support barrier.
Even lower could be the 49.16 (S3) support level.