Crude Oil Taps 3-Month Lows, US Supply Glut Swells

Crude Oil Taps 3-Month Lows, US Supply Glut Swells

Crude Oil Taps 3-Month Lows, US Supply Glut Swells


Crude Oil (OIL, USO) hung around 3-month lows Monday on rising inventories and drilling activity in the United States.

After 2 + months of reduced production from the Organization of the Petroleum Exporting Countries (OPEC), the market is facing evidence that US production remains high and global markets continue to be oversupplied.

Brent Crude futures fell 7 cents to 51.30 bbl by 11:33a EDT, having hit a session low of 50.85, its lowest level since 30 November.

WTI Crude Oil fell 20 cents to 48.29 bbl, a 0.4% loss.

Prices have fallen by more than 8% since last Monday, its biggest W-W fall in 4 months, and analysts said the slide may have much further to go, I am one of them.

Goldman Sachs said in a note it remained “very confident” about commodity prices and maintained its price forecast of 57.50 for WTI in Q-2.

The slide could be the result of traders unwinding Bullish Long positions, and could slow as those positions are unwound.

US drillers added oil rigs for an 8th week running, Baker Hughes (NYSE:BHI) data showed Friday, and they have announced ambitious production growth plans as they rebound from a 2-year price war with OPEC.

OPEC and other major Crude Oil producers, including Russia, reached an agreement at the end of November to rein in production by almost 1.8-M BPD in 1-H of Y 2017.

Russia’s top Crude Oil major Rosneft warned that a recovery in US output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war.

Although OPEC states have been complying with supply curbs, led by Saudi Arabia, it has not been enough to overshadow a rise in US inventories to a new high.

Money managers cut their net long positions in US Crude Oil futures and options in the week to 7 March.

HeffX-LTN Analysis for OIL: Overall Short Intermediate Long
Bearish (-0.39) Neutral (-0.19) Very Bearish (-0.50) Bearish (-0.47)
HeffX-LTN Analysis for USO: Overall Short Intermediate Long
Bearish (-0.35) Neutral (-0.10) Bearish (-0.48) Bearish (-0.47)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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