Crude Oil Price Stabilizes, Downtrend Remains Intact
Crude oil price, news and analysis:
- The US benchmark crude oil price has steadied this week ahead of the upcoming OPEC meeting.
- However, with inventories building and Saudi output at record levels, the outlook remains bleak.
US crude oil price could resume its decline
The price of the benchmark US crude oil contract has recovered modestly over the last few sessions but both fundamentally and technically the outlook remains grim.
The Organization of the Petroleum Exporting Countries will meet next Thursday in Vienna, along with some non-OPEC countries including Russia, and is widely expected to cut output. Before then, the crude oil price will likely be discussed at the two-day G20 meeting in Buenos Aires that begins this coming Friday.
However, the prospect of supply cuts is now arguably in the price already and US President Donald Trump is pressing Saudi Arabia not to reduce its output, which has reportedly hit a record high this month. Moreover, an apparent slowdown in global economic activity would likely reduce demand.
US crude inventories rising
The Buzzard oilfield in the North Sea, the UK’s largest, has been shut down because of pipe corrosion, potentially reducing supplies, but the outage will only be temporary. In the meantime, data from the American Petroleum Institute showed a 3.45 million barrels rise in inventories last week – well above expectations.
If that is confirmed by today’s official US Department of Energy figures, it will add to the downward pressure on prices, which have hit their lowest levels since October last year.
US Crude Oil Price Chart, Daily Timeframe (May 12, 2017 – November 28, 2018)
Meanwhile, from a technical perspective, the key levels to watch are the $50/barrel level last breached on October 10 last year. If the price of US crude drops below that, it could fall quickly to the October 6 low at $49.30 and then to the support line of the current downtrend, currently at $47.60.
To the upside, resistance is at the upper bound of the channel, now at $54.68 and a break through there would suggest a sharper move higher.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.