Daily Crude Oil Analsys

WTI Crude analysis for 12/13/2016

WTI Crude intraday trade plan

Dec 13th 2016 Updated at 09:55 pm EST on Dec 12th 2016

WTI Crude had gapped higher to confirm a bullish breakout in the Globex session yesterday after the news and topped at 54.49.  However we hit heavy profit taking with prices filling the gap on the weekly chart as we dipped just below last week’s high at 52.42 to bottom at 52.18 here again in today’s Globex session.

WTI Crude retests important longer term trend line support at 52.20~52.10 for a buying opportunity. The safest trade is to have a stop below 51.40. In my opinion, there is a good chance we head higher now after the gap has been filled and today’s targets are 52.60~52.70 initially and 53.30~53.40 then 54.00~54.10 before the 54.40~54.49 high. If we continue further up this week which is the more likely scenario from any positive inventory news for instance, we will target 54.85~54.90, 55.10~55.15, 55.75~55.80, 56.06~56.10 & 56.40~56.50. 

There is strong support at 52.20~52.10 which we just tested in the Globex and reasonably strong support at 51.60~51.50 if we did unexpectedly continue lower. Breaking down below 51.40 however is more negative and signals a false breakout yesterday. This puts bears back in control for 50.70~50.60 and perhaps as far as 49.90~49.80.

Pivots for Dec 13th, 2016

R3=54.06 | R2=53.28| R1=52.81 <-> S1=51.87 | S2=51.40 | S3=50.62

WTI Crude Daily Chart View

cl-daily-12-13-2016

News and doubts over OPEC’s output cut plan set in (A WSJ report)

Dec 13th 2016 Updated at 09:55 pm EST on Dec 12th 2016

Crude oil prices lost steam in early Asian trade Tuesday as investors turned bearish over oil producers’ commitment to observe a deal aimed at easing supply to the market. On the New York Mercantile Exchange, light, sweet crude futures for delivery in January traded at $52.67 a barrel at 0233 GMT, down $0.16 in the Globex electronic session. February Brent crude on London’s ICE Futures exchange fell $0.01 to $55.68 a barrel.  Over the weekend, 11 non-OPEC countries, including Russia, agreed to slash their output by 558,000 barrels a day, in concert with OPEC’s own pledge to cut 1.2 million barrels a day. The total sum represents almost 2% of global supply.  The deal will take effect on Jan. 1 but the reduction will be carried out in phases. Participating countries will meet in six months to evaluate progress.

Analysts say if producers fully adhere to agreed quotas, the oil market could shift into a deficit. OPEC’s own calculations forecasts world crude demand will hit 95.5 million barrels a day in 2017, an increase of 1.2 million barrels a day.  Removing excess barrels will lift prices, possibly into the $60 to $70 per barrel band, but it would mostly hinge on the compliance of the producers, who have been known to cheat, said BMI Research.  “We note that the higher the barrel price, the greater the temptation to break allocated quotas,” the firm said.  In 17 production cuts since 1982, OPEC members have reduced output by an average of just 60% of their commitments, according to Goldman Sachs.  Production from Nigeria and Libya, the two OPEC members currently exempt from the deal, also add downside risks to the success of the OPEC plan, said Morgan Stanley.

The OPEC deal was based on production data in October in which had Libya’s production at 528,000 barrels a day. However, energy consulting firm Rapdian Group now predicts the odds of Libyan’s oil production hitting 750,000 barrels a day are now 55%, buoyed by ongoing talks between the government and insurgent groups to reopen a key pipeline.  Oil production in Nigeria has also edged up in past few months. However, situation there remain murky with several new militias in the Niger Delta reportedly sabotaging the recovery process.

The effect of higher oil prices on demand is also fueling market skepticism over how successful the deal will be, said JBC Energy.  The firm says recent growth in the number of active oil rigs in the U.S. shows shale producers are ready to swoop in to benefit from the higher prices. “How long countries making cuts are able to hold out at lower supply levels? Are they prepared to do so on an extended basis?” the firm asked.  Nymex reformulated gasoline blend stock for January–the benchmark gasoline contract–fell 19 points to $1.5411 a gallon, while January diesel traded at $1.6716, 1 points lower.  ICE gasoil for January changed hands at $490.00 a metric ton, down $1.00 from Monday’s settlement.

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