How Is The Needle Moving On Crude Oil?

How Is The Needle Moving On Crude Oil?

Crude oil prices remained nearly unchanged, with benchmark Brent crude oil spot (XBR) recovering after setting a low of $63.88 (as on 8th March 2019) and ended the trading session at $65.56, which marked first negative closing for the oil, after four consecutives closes on a positive note.

The WTI Crude spot (WTI/USD) followed the same trajectory and recovered sharply from the day’s low of $54.37 (on 8th March) to mark a close of $55.86.

The factor which pulled the crude oil prices down towards the respective lows was higher U.S. weekly crude oil inventories. The U.S. weekly crude oil inventory marked a surge for the week ended 1st March and reported by U.S. Energy Information Administration at 7.1M.

The reported inventory level marked a surge, as compared to the previously reported level of -8.6M and above the market expectations of 1.2M. The higher reported inventory, generated pessimism among the speculators, over the building U.S. Crude oil inventory and thus, in turn, exerted the pressure on crude oil prices.

However, in the presence of steady demand and building optimism among the energy investors over the U.S-China trade talks, the prices again uplifted today with XBR hovering around $66.15 and WTI around $56.42. The primary factor which supported the crude oil prices was the voluntary production cut by the OPEC members to support the crude oil prices. It is clearly evident from the OPEC time-to-time actions that its members create a production cut in order to support the crude oil prices.

Previously, Crude oil prices dived over a tweet of U.S. president Donald Trump, which addressed the OPEC, not to reduce the production as U.S. president Donald Trump believes that the growing US economy cannot incorporate the high crude oil prices. However, the supply disruption caused by U.S. sanctions on Venezuela’s state-owned PDVSA further supported the crude oil prices. The ban which marked a decreased production of crude oil in Venezuela and lesser import caused a supply disruption in the market and speculators and traders were quick to react over the U.S. sanctions, and their bullish stance supported the crude prices.

On the demand side, which looks steady from the global consumption perspective marked another event, with India still asking to buy oil from the U.S. Banned Iran. The U.S. ban on the major crude oil exporter came in light in November 2018, due to the dispute over Tehran’s nuclear and missile ambitions and supported the crude oil prices. In the present status quo, India is still in deals with Washington on extending its sanctions waiver, which expires in May 2019, to buy crude from Iran to its average level of 300,000 barrels per day or about 1.25 million tonnes per month.

Over the above mention events and demand-supply fundamental, crude prices are hovering in a range of $64.41 to $66.93 from past four trading sessions.

To gauge the direction of the oil market further, market participants are keeping a close watch on the building U.S. crude inventories and the U.S. potential to emerge as a world exporter of the oil in the absence of domestic demand. However, the U.S. economy is recovering which is also marked by the rising dollar prices, and its position as a net importer or exporter will decide the crude direction in the future.


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