Crude oil prices test recent lows at start of holiday-shortened week

Andrew Cummings
November 20, 2018

USA crude inventories probably rose by 3.5 million barrels last week, according to the median forecast in a Bloomberg survey of analysts.

Crude futures and equities fell in tandem during a broad market sell-off last month that saw investors dump risk assets. "Oil market had a lot of noise thrown at it overnight, IEA notwithstanding, but still bounced back, suggesting details of December 6 meeting should provide a stable platform for prices over the near term".

Firmer supply than anticipated due to waivers granted on Iranian oil exports, as well as concerns about demand, have weighed on prices, and uncertainty about the response of OPEC+ (the cartel and certain non-members including Russia) lingers.

While Saudi Arabia's Energy Minister Khalid al-Falih says that based on the OPEC+ group technical analysis, "there will need to be a reduction of supply from October levels approaching a million barrels", reports emerged last week that Russian Federation would rather stay out of any fresh oil production cuts led by the Saudis.

"Oil prices rose (last week) on hope OPEC and partners will act to reverse bearish sentiment, but from a technical set up, bear mode remains intact", OANDA strategist Stephen Innes said.

- United States crude oil output has risen by nearly 25% this year, to a record 11.7 million barrels per day (bpd).

"We are now trading the January 2019 WTI Crude Contract on the Globex-Nymex exchange as today is the last trading day for the December 2018 futures contract", John Thorpe, a commodity broker at Los Angeles-based Cannon Trading, told UPI. Total volume traded Tuesday was 40 percent above the 100-day average. The more-active January contract gained 73 cents to $57.41.

Brent crude futures fell $4.50, or 6.7 per cent, to $62.29 a barrel.

United States energy firms added two oil rigs in the week to November 16, bringing the total count to 888, the highest level since March 2015, a weekly report by energy services firm Baker Hughes said on Friday. U.S. crude production has been rising, hitting a record in the week ended November.

OPEC nations will meet on December 6th to discuss further output cut deal.

Ahead of U.S. inventories data, the USA benchmark hovers a cents above the 53.00 level, extremely oversold but still bearish according to technical readings in the daily chart, as indicators resumed their declines within oversold territory, while the commodity continues developing below a strongly bearish 20 DMA. Downside risks in the form of slowing demand and rising U.S. shale production has outweighed the upside impact of Iranian sanctions and potential production cuts from OPEC.

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