Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Oil Prices Vulnerable to Signs of Growing U.S. Crude Output

Fundamental Forecast for Crude Oil Prices: Bearish

The broader outlook for crude remain constructive as the Organization of the Petroleum Exporting Countries (OPEC) and its allies prolong the production cuts from 2017, but the ongoing expansion in U.S. output may continue to drag on oil prices as the International Energy Agency (EIA) warns ‘explosive growth in the U.S. and substantial gains in Canada and Brazil will far outweigh potentially steep declines in Venezuela and Mexico.’

Oil Prices Vulnerable to Signs of Growing U.S. Crude Output

With field outputs bouncing back in the week ending January 12, the U.S. Energy Information Administration (EIA) now projects ‘total U.S. crude oil production to average 10.3 million barrels per day (b/d) in 2018, up 10% from 2017.’ Higher energy prices may continue to fuel non-OPEC production as ‘seven new oil-producing projects are slated to come online by the end of 2019,’ and market participants may pay increased attention to the ongoing expansion in U.S. supply as the figures are expected to exceed the previous record of 9.6 million b/d set in 1970.

In response, OPEC and its allies may keep the door open to extend the rebalancing efforts beyond 2018 as the group meets in Oman this weekend, but signs of growing supply may keep crude oil prices under pressure especially as recent price action highlights the risk for further losses. Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

USOIL Daily Chart

Oil Prices Vulnerable to Signs of Growing U.S. Crude Output

Downside targets are coming back on the radar for USOIL following the failed attempt to close above the 64.80 (100% expansion) hurdle, with oil prices at risk for further losses as the Relative Strength Index (RSI) finally slips below 70 and flashes a textbook sell-signal. A break/close below 62.80 (38.2% retracement) raises the risk for a move towards the 62.00 (61.8% expansion) handle, which largely lines up with trendline support. Next region of interest comes in around 60.80 (78.6% retracement) followed by the former-resistance zone around 59.00 (61.8% retracement) to 59.60 (38.2% expansion). Interested in trading? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Sign up for David's e-mail distribution list