Crude oil prices remain stable on Wednesday, as markets are under the influence of two fundamentally different factors – the signs of a slowdown in the global economy and a reduction in supply by the Organization of Petroleum Exporting Countries (OPEC). It is the limited production that keeps Brent’s price above 60 USD per barrel, but the uncertainty of markets is growing anyway.
The futures on US crude oil WTI with delivery in February rose by 0.13% to 52.18 USD per barrel. The Brent variety appreciated by 0.18% to 60.75 USD per barrel.
The WTI oil stands at the back foot in early US trading on Wednesday, after recovery attempts in Asian session which peaked at 52.50 USD per barrel, were short-lived. Tuesday’s bullish outside day pattern provided little support to oil price which stays congested within triangular consolidation for the third straight day. Strong pressure also comes from falling thick daily cloud (cloud base lays at 54.37 USD) and south-heading momentum and slow stochastic.
From a fundamental point of view, there is no clear direction for the oil markets at the moment.
Prices are under pressure due to signals of a slowdown in the global economy. China, the world’s largest economy, is facing growing trade uncertainty this year after poor data on imports and exports.
In Japan, manufacturing orders slowed down sharply in November, indicating that companies’ capital spending may lose momentum as the US-China trade war is affecting other countries as well.
However, oil markets are supported by shrinking supply from OPEC and Russia. The effect of OPEC supply cuts, Iranian sanctions, and weaker monthly US production growth should help keep oil prices at current levels.
OPEC together with Russia agreed at the end of 2018 to reduce supply in order to contain the global market saturation. Previously, in November, the US again imposed sanctions against Iranian oil exports. Although Washington exempts Iran’s largest clients, mostly from Asia, the exports from the Middle East have since collapsed.
Iranian exports have fallen sharply and are likely to remain at about 1.3 million barrels per day in 2019, which is about 1.3 million barrels per day below the average for the first half of last year.
Rising crude oil production in the US, which reached a record 11.7 million barrels per day late last year, however, threatens to undermine OPEC efforts. Crude oil production in the US is expected to reach a record 12 million barrels per day this year and nearly 13 million barrels next year, according to the Energy Information Administration first forecast for 2020.
The EIA also reported that the US crude oil refinery inputs averaged 17.2 million barrels per day during the week ending January 11, 2019. The gasoline production increased last week, averaging 9.6 million barrels per day.
The distillate fuel production decreased last week, averaging 5.4 million barrels per day.
The US commercial crude oil inventories decreased by 2.7 million barrels from the previous week. The total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 2.1% from the same period last year.
Oil prices are expected to fluctuate near their current levels, according to an annual energy experts report from January 8th to January 11th. Forecasts are that Brent’s prices reach an average of 65 USD per barrel in 2019, as were expectations for 2016, 2017 and 2018.