Crude Oil Weekly Report: How long will Oil rally last?
U.S. WTI and Brent crude oil futures closed the week higher on Friday.
Which fundamentals drove Crude Oil prices higher this week?
Deeper-than-expected OPEC-led production cuts: Saudi Arabia is delivering on the cuts it pledged, and I have no doubt they’ll deliver on pledges to do more. As I mentioned in my previous articles the reason of the big drop on Oil Prices was a production boost from OPEC and an equity sell-off that pushed oil down during the fourth quarter, and now as both of those elements are in reverse prices are going up.
Trade Deal Optimism: Press reports suggest that the U.S. and China are making progress on trade negotiations, and President Trump has indicated he would be willing to let the talks continue past the March 1 deadline if progress was significant. Trump is expected to meet with China’s vice premier and top trade negotiator on Friday. There are still thorny issues that will be difficult to solve, but markets are welcoming the potential breakthrough in trade talks.
Meanwhile, the EIA report showed that Crude Oil Inventories stocks rose three weeks in a row.
Simply saying, The U.S production is likely to limit the gains for WTI in the near future.
WTI vs BRENT
The spread between Brent crude oil and WTI crude oil has risen from a low of $6.80 on January 31 to a high of nearly $10.00 ( Brent Crude Oil ended the week at 66.90). This is the result of a combination of the OPEC-led production cuts and the sanctions against Venezuelan exports, which are supportive for Brent crude oil, and the rising U.S. production, which is helping to limit gains for WTI crude oil.
Baltic Dry Index:
You can see view the BDI Chart on our website.
BDI rose a bit in February but it is still not promising for Global Economic Activity. Simply saying: Less economic activity, less Oil demand.
IEA is not so bullish:
According to the International Energy Agency, the global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group’s production cuts and U.S. sanctions on Venezuela and Iran.
Furthermore, the IEA said it expected global oil demand this year to grow by 1.4 million bpd, while non-OPEC supply will grow by 1.8 million bpd. This doesn’t bode well for the long-term crude oil bulls.
Crude Oil Weekly Chart:
Fundamentally, there is no reason for Crude Oil prices to be traded above $ 62.50 for the time being. Its retracement zone at $59.38 to $62.50 is the primary upside target. Since the main trend is down, sellers are likely to show up on a test of this zone
On the other side, the potential downside move would be limited as well. OPEC + would not let the Oil Prices stay below $ 50.
Simply saying, potential pullbacks towards $ 50 can be used as a buying opportunity.
Near Term Trade Opportunity:
RSI Divergence H4 Chart
We will look for a short opportunity if the price breaks out the trendline. The first target of the Bears will be 56.25. The breakout of 56.25 would lead the prices 55.75 and 54.70. Those levels can be used as buying opportunities.
Which fundamentals drove Crude Oil prices higher this week?
Deeper-than-expected OPEC-led production cuts: Saudi Arabia is delivering on the cuts it pledged, and I have no doubt they’ll deliver on pledges to do more. As I mentioned in my previous articles the reason of the big drop on Oil Prices was a production boost from OPEC and an equity sell-off that pushed oil down during the fourth quarter, and now as both of those elements are in reverse prices are going up.
Trade Deal Optimism: Press reports suggest that the U.S. and China are making progress on trade negotiations, and President Trump has indicated he would be willing to let the talks continue past the March 1 deadline if progress was significant. Trump is expected to meet with China’s vice premier and top trade negotiator on Friday. There are still thorny issues that will be difficult to solve, but markets are welcoming the potential breakthrough in trade talks.
Meanwhile, the EIA report showed that Crude Oil Inventories stocks rose three weeks in a row.
Simply saying, The U.S production is likely to limit the gains for WTI in the near future.
WTI vs BRENT
The spread between Brent crude oil and WTI crude oil has risen from a low of $6.80 on January 31 to a high of nearly $10.00 ( Brent Crude Oil ended the week at 66.90). This is the result of a combination of the OPEC-led production cuts and the sanctions against Venezuelan exports, which are supportive for Brent crude oil, and the rising U.S. production, which is helping to limit gains for WTI crude oil.
Baltic Dry Index:
You can see view the BDI Chart on our website.
BDI rose a bit in February but it is still not promising for Global Economic Activity. Simply saying: Less economic activity, less Oil demand.
IEA is not so bullish:
According to the International Energy Agency, the global oil market will struggle this year to absorb fast-growing crude supply from outside the Organization of the Petroleum Exporting Countries (OPEC), even with the group’s production cuts and U.S. sanctions on Venezuela and Iran.
Furthermore, the IEA said it expected global oil demand this year to grow by 1.4 million bpd, while non-OPEC supply will grow by 1.8 million bpd. This doesn’t bode well for the long-term crude oil bulls.
Crude Oil Weekly Chart:
Fundamentally, there is no reason for Crude Oil prices to be traded above $ 62.50 for the time being. Its retracement zone at $59.38 to $62.50 is the primary upside target. Since the main trend is down, sellers are likely to show up on a test of this zone
On the other side, the potential downside move would be limited as well. OPEC + would not let the Oil Prices stay below $ 50.
Simply saying, potential pullbacks towards $ 50 can be used as a buying opportunity.
Near Term Trade Opportunity:
RSI Divergence H4 Chart
We will look for a short opportunity if the price breaks out the trendline. The first target of the Bears will be 56.25. The breakout of 56.25 would lead the prices 55.75 and 54.70. Those levels can be used as buying opportunities.
Comment:
Bearish Move Started.
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