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 Talking Points

Oil pulls back from a fresh weekly-high ($54.68) even as producers in Russia plan to cut production , and the failed attempt to test the monthly-high ($55.75) may generate range-bound conditions as oil prices snap the series of higher highs & lows from earlier this week.

Image of daily change for major financial markets

Oil Risks Range-Bound Prices as Bullish Series Snaps

Image of daily change for crude oil prices

It seems as though the Organization of the Petroleum Exporting Countries (OPEC) and its allies will continue to curb production over the coming months as Lukoil now pledges to cut output by 47K b/d. However, it remains to be seen if the current alliance will carry beyond the six-month agreement as CEO Vagit Alekperov hopes the OPEC+ agreement will have a short-term nature.

The comments suggest the efforts may be unwound after June as Gazprom Neft CEO Alexander Dyukov argues that the global energy market is balanced, but OPEC and its allies may continue to push for higher oil prices as Russia Minister of Energy, Alexander Novak¸ intercedes that the agreement with OPEC is positive for Russian oil companies.

In fact, OPEC may look to extend its efforts beyond the current deadline as the most recent Monthly Oil Market Report (MOMR) shows a further reduction in the oil demand forecast, and the weakening outlook for global growth may encourage OPEC and its allies to keep a lid on production especially as ‘the non-OPEC oil supply growth forecast for 2019 was also revised up by 0.08 mb/d to 2.18 mb/d.’

Image of EIA weekly field production of crude oil

Indeed, fresh updates from the Energy Information Administration (EIA) showed U.S. Crude inventories climbing 3633K versus forecast for a 2400K expansion in the week ending February 8, but a deeper look at the report showed weekly field production holding steady at 11,900K b/d for the fifth consecutive week.

The slowdown in non-OPEC output may continue to shore up crude especially as the U.S. imposes sanctions against Petróleos de Venezuela, S.A. (PDV S.A.), and the current environment raises the risk for higher oil prices as an inverse head-and-shoulders formation appears to be taking shape, while the Relative Strength Index (RSI) continues to track the upward trend from late-2018. Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups.

Oil Daily Chart

Image of crude oil daily chart
  • Keep in mind, the broader outlook for crude remains constructive following the break of the December-high ($54.55), with a break/close above $55.10 (61.8% expansion) to $55.60 (61.8% retracement) raising the risk for a move towards $57.40 (61.8% retracement).
  • However, the lack of momentum to test the monthly-high ($55.75) raises the risk for range-bound prices, with the first area of support coming in around $51.40 (50% retracement) to $52.10 (50% expansion).

For more in-depth analysis, check out the 1Q 2019 Forecast for Oil

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other markets the DailyFX team is watching? Download and review the Top Trading Opportunities for 2019.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.