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Brent crude oil futures in the US West and Mid-West Texas finished higher last week after reaching new highs for the previous year. However, Friday's weak session suggests that buyers may face headwinds this week due to growing worries about the global economy and rising production in the United States.
Looking at the weekly charts, it appears that buyers and sellers are torn between global economic concerns and the strength of US oil production and strict adherence to the OPEC-led plan to reduce production, reduce inventory excessive prices and to stabilize prices.
Last week, WTI crude oil futures were $ 58.82, up $ 2.39 or 4.24% and crude oil in May Brent was $ 67.16, up up $ 1.42 or + 2.11%.
Backed by cuts in supplies and unexpected disruptions
OPEC production cuts that began on January 1 and US sanctions against Iran and Venezuela have been driving crude oil prices for months
IEA sees a deficit coming
On Friday, the International Energy Agency (IEA) said the market could post a modest surplus in the first quarter of 2019 before turning into a deficit in the second quarter of about 0.5 million barrels a day.
IEA sees that demand needs are met
The IEA launched a little water Friday during the rally when she said that OPEC had created a comfortable supply cushion that could prevent a price spike due unforeseen disruptions in the supply. In addition, the IEA also said that the growth of oil production off OPEC, under the impetus of the United States, should ensure the satisfaction of demand. This news lowered prices on Friday.
Concerns about fuel demand
Concerns about the economic slowdown in Asia and Europe could dampen growth in fuel demand and price cap increases are also weighing on prices. Translation: Buyers seem to be afraid of raising prices. Although prices have firmed since the end of December, most purchases were made short. Prices reached the 50% level of the major break of October. This discourages long-term traders from increasing their positions and encourages hedge operators to block their prices.
Mixed news on supply and demand last week
Goldman Sachs hinted last week that concerns over global demand could be exaggerated. GS badysts said: "In January, global crude oil demand grew by nearly 2.0 million barrels a day, with visible strength in both emerging and developed economies."
In addition, recent data has shown that crude oil use in China, the world's largest importer, increased by 6.1% in the first two months of 2019 compared to the previous year, reaching a record of 12.68 million bpd.
In addition, worries about rising inventories and production in the US were lifted last Wednesday, at least temporarily, with the release of a bullish report on EIA stocks.
The EIA report for the week ended March 8th showed that US crude oil inventories fell as refineries increased production.
Crude oil inventories fell by 3.9 million barrels in the last week to 449.07 million barrels, while badysts forecast an increase of 2.7 million barrels. Crude oil production in the United States also declined, dropping from 100,000 barrels per day to 12 million bpd.
Weekly forecasts
Last week's price action suggests that May's WTI crude oil is on the brink of resistance and may be ripe for a short-term correction. The main upward target is a weekly level of 50% to $ 58.63. May Brent met a key resistance at $ 67.74 for the second time in a month.
In addition, OPEC and its allies will meet on 17 and 18 April to decide on production policy. Our work suggests that an extension of production cuts is likely to continue. In addition, an ongoing bidding process, combined with growing demand, due to the expected end of the US-China trade dispute, is expected to drive price increases later in the year.
In the short term, however, markets will likely remain in the range until key resistance levels are overcome by a wave of large purchases.
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