Crude Oil Price News: OPEC Cuts And China Demand Give Stability
Fundamental Forecast for USOIL: Bullish
Crude Oil Price News Talking Points:
- Crude Oil continues to trade near two-year highs as demand appears to be outstripping supply
- EIA Crude Oil Inventory Report showed rising gasoline stockpiles causing mid-week volatility
- Per BHI, U.S. Oil Rig Count rose by 2 to 931
- Oil Market Insight From IG UK: Net-short retail trader bias provides a Bullish price outlook
Crude Oil price per barrel extended gains to end the week in what was seen as a relief rally after a disappointment EIA Crude Oil Inventory Report that showed a rise in gasoline stockpiles. When there is a rise in refined crude products, traders imply from the data that demand may be softening. However, it’s worth looking behind the scenes to see that Oil refining is increasing aggressively to pre-Hurricane Harvey levels toward the end of the year.
Chinese Refinery Demand Supports Global Energy Market
Despite the rise in gasoline stockpiles, Oil outperformed metals aggressively for the first full week of trading in December. Metals marked their worst week since May 2016 as doubts surfaced on infrastructure growth demand from China. Naturally, traders tend to look to base metals like Copper and Iron Ore when dropping demand from China becomes a news item, but precious metals also dropped this week.
Other Commodities Disappoint As Oil Holds Firm
The gold price forecast fell as Gold suffered its third weekly decline, but this week’s decline was the largest in seven months. The blame for precious metal underperformance was an improving US interest rate outlook on an expectation that US Tax Reform was progressing.
The Oil price was able to rebound to the end of the week thanks in large part to Chinese data showing local refiners purchased Oil from abroad (i.e., imported) crude to near record levels of 9.05m b/d. At the same time, a proxy for Chinese inventory levels that also implies demand from Shandong ports came in at three-month lows after falling nearly 4% w/w.
Brent Crude Price Forecast Analysis
Despite the news flow, the volatility for Brent oil price has fallen to a three-year low, which has a lot to do with the after-effect of pre-OPEC volatility. On the Brent oil price chart, traders will likely continue to keep an eye on price action holding above $61/bbl on a closing basis to show the uptrend is at play and that a possible double-top is not playing out. A break below $58/bbl would be a key breakdown that would support the “double-top” pattern view, but above there, the Bullish trend continuing slowly as evidenced by implied volatility is favored. The support point of the topping pattern is the lower white line at ~$58/bbl.
There’s a global rise in oil demand! Click here to see our Q4 forecast on what outcomes we're watching!
Brent Crude Price Chart Works To Avoid Double-Top
Chart Created byTyler Yell, CMT
Next Week’s Data Points That May Affect Energy Markets:
The fundamental focal points for the energy market next week:
- Sunday (All Day): Meeting of the Organization of Arab Petroleum Exporting Countries (OAPEC)
- Tuesday 12:00 PM ET: EIA releases monthly Short-Term Energy Outlook
- Tuesday 4:30 PM ET: API issues weekly U.S. oil inventory forecast
- Wednesday 10:30 AM ET: EIA weekly US Oil Inventory Report
- Thursday 4:00 AM ET: IEA monthly Oil Market Report
- Thursday 9:00 PM ET: China’s National Bureau of Statistics to release energy data, including crude oil, natural gas
- Fridays 1:00 PM ET: Baker-Hughes Rig Count at
- Friday 3:30 PM ET: Release of the CFTC weekly commitments of traders report on U.S. futures, options contracts
Crude Oil Market Insight from IG UK Client Positioning
We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week, which makes the signal weaker, but when combining sentiment with the charts above the bias remains bullish for Crude Oil.
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