WTI Crude Oil Forecast: Continue Testing Resistance

Andrew Cummings
December 11, 2019

West Texas Intermediate Crude Oil pulled back slightly during the trading session on Wednesday, reaching towards the $58 level. Brent crude for February delivery declined 14 cents to set at USD64.25 dollars per barrel on the London ICE Futures Exchange.

Monday's sudden chill came after customs data released on Sunday showed exports from the world's second-biggest economy in November fell 1.1 percent from a year earlier - a sharp reversal from expectations for a 1 percent rise in a Reuters poll.

Oil prices fell on Wednesday after industry data showed an unexpected build in crude inventory in the United States and as investors waited for news on whether a fresh round of USA tariffs on Chinese goods would take effect on Sunday.

According to the EIA, commercial crude oil inventories increased by 0.8 million barrels in the week ending December 6th, compared with analysts estimate for a decrease of 2.75 million barrels.

Saudi Arabia recorded the largest drop in production, by 151,000 bpd to 9.85 million bpd, just as the Kingdom was busy signaling to its partners that it would no longer tolerate cheating in the OPEC+ deal.

"The inventory data was rather bearish when you consider the fall in refinery run rates and the cratering of gasoline demand", said John Kilduff, a partner at Again Capital LLC in NY. Ultimately, this is a market that is at the mercy of OPEC and several other factors. If the situation continues to deteriorate between the Americans and the Chinese, it's likely that the demand for crude oil will continue to deteriorate as well. "These revisions lead us to forecast a broadly balanced 2020 global oil market, 0.3 million bpd tighter than our previous forecast".

But a bullish jolt that followed the agreement appears to have dissipated as demand concerns have emerged again, said Gene McGillian, vice president of market research at Tradition Energy in Stamford, Connecticut. Despite the continued "slowdown in growth on the back of decreased investment and lower drilling activities in United States tight oil", OPEC expects that "incremental production from the USA tight plays, particularly in the Permian Basin, as well as from offshore fields in Norway, Brazil, Australia and possibly Guyana, will contribute to the non-OPEC supply in 2020".

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