WTI Outlook | Is Oil poising for a rebound? | 28/05/18

[IronFX The Global Leader in Online Trading]( 28th May 2018 [start trading]( [open demo account]( All trading involves risk. It is possible to lose all your capital. Is Oil poising for a rebound? Fundamental Analysis: Headlines of raising OPEC and Russia oil production are flooding the market, with the news sector rushing to reassure that the event is of serious consideration and could happen sooner than expected. Following this statement is also the fact that OPEC and Russia are somewhat satisfied with current levels and prices and have reached their target. With no guarantee, that said, OPEC and Russia could be dissatisfied with the late decrease in price, as one of their main objective was to see prices stabilize. Since Friday the 25th of May the black gold has lost almost 4 USD bpd in value amid the pre- mentioned news, creating some instability within the price market as well as demand and supply concerns. Riyadh and Moscow would ease 17 months of strict supply curbs as prices were seen to rise out of control, putting an end to curbing output by about 1.8 million barrels per day (bpd) through 2018 to reduce global stocks that was agreed back in 2017. In the past April, the Team’s (OPEC and Russia) participant’s decreased production by 52 percent more than required, accompanying the falling output from crisis-hit Venezuela, helped OPEC deliver a bigger reduction than intended giving strength to the commodity’s price. It must be noted that, OPEC stated only some of its members could fill in the gap and so the reaction to the matter could be somewhat complex. However, in our last report sent on the 23rd of May, we mentioned that many Oil producers were seen hedging against fears of a decreasing price regarding 2018 and 2019. In our opinion, these fears could be due to a chance of a sudden change of mind by OPEC and its Team mates regarding production, leaning towards adding supply and also amid increasing demand of the commodity especially coming from Asia. Furthermore, the above was confirmed by Russian Energy Minister Alexander Novak were he said that the time has approached for a re consideration of the output cuts indicating that they could be overdoing it. At the same time the Middle East is facing issues regarding the Iran nuclear deal that could affect supply and price. Moreover, China officials have reached out to Saudi Arabia on Friday in order to discuss cooperation between their countries and to review the oil market but also raised concerns if enough oil is being pumped. It could be the case that China will be increasing its Oil imports and is looking to lock on its supplier. Import statistics and data confirm this scenario exists for Asia imports in total. Sinopec, Asia's largest refiner, bought a record 16 million barrels, or about 533,000 bpd of U.S. crude, to load in June, two sources with knowledge of the matter said past week. In this front, most of the supply is imported from the US which owns supertankers. These supertankers, also known as VLCCs or very large crude carriers, can withhold approximately 2 million barrels of oil, an amount favored by Asian buyers with bigger ports. Adding to that, U.S. energy companies added 15 rigs in the week ended May 25th, bringing the rig-count to 859, the highest level since 2015, which is evidence that American crude production will persist. On a separate note, the effect of reduced supply from the Middle East has been noted. Starting with South Korea purchases of sweet crudes from the United States and Africa are growing as its refiners increased cargoes to substitute more expensive Middle East grades. Again the ongoing OPEC Cuts and the Iranian Issue are creating doubts of future supply coming from the Middle East. However, because most Oil is retrieved from Saudi Massive Oil producer Aramco, we hesitate to jump to farfetched conclusions of cutting supply as the company is consider as a champion in its field. As a conclusion, the latest drop in prices could be due to a huge profit taking action or just a price correction that had to be made in order to give oil a new outlook in the market. In our opinion, this could be viewed as an opportunity, though what the market is thinking remains to be seen.   Technical Analysis: Crude Oil is currently trading around $66.70 per barrel. It must be noted that in the past 2 sessions starting on the 24th of May the commodity has broken all 3 of our previous support lines (S1) $71.50 (S2) $70.50 and (S3) $69.00 which are now turned to resistance levels Crude Oil Daily Chart below [Image title] Also, signs of a bull market are evident, especially on the 4 hour chart however we choose to give you the daily chart in order to show a more complete picture on Support levels not visible in shorter intervals. Today, Monday the 28th Crude oil has rebounded some $0.50 p/b in gains and looks to be willing to move higher towards the $68.00 (R1) Resistance level and even breach it aiming for the $69.00 (R2) Resistance hurdle should the bulls remain in power. In case of a further slip in the commodity’s price, the bears could overtake the market making oil drop to the $66.13 (S1) Support level and even break it aiming for the $64.95 (S2) Support hurdle. If an undecided market is seen, the commodity could move in a sideways manner in between the $68.00 (R1) Resistance level and the $66.13 (S1) Support level. Prepared by: Peter Iosif and Angelos Zittis [Facebook]( [Linkedin]( [Instagram]( [Twitter]( [Google+]( [YouTube]( - Tel: +44 (0) 20 3282 7777 - Email: support@ironfx.com High Risk Trading Warning: Our services include products that are traded on margin and carry a risk of losing all your initial deposit. Before deciding on trading on margin products you should consider your investment objectives, risk tolerance and your level of experience on these products. Trading with high leverage level can either be against you or for you. Margin products may not be suitable for everyone and you should ensure that you understand the risks involved. You should be aware of all the risks associated in regards to products that are traded on margin and seek independent financial advice, if necessary. Please read IronFX’s Risk Disclosure statement. 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