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Crude Oil Evaluation: Bearish Streak Persists as Trump Jawboning Negates OPEC U-Flip

Oil Value Evaluation and Information

Document Crude Oil Dropping Streak

OPEC U-Flip

Trump Jawboning

Brent Crude Futures Strikes Deeper into Contango

For a extra in-depth evaluation on Oil Costs, try the This fall Forecast for Oil

Document Crude Oil Dropping Streak

Yesterday noticed oil costs drop for the 11th consecutive session, marking a report run of losses for crude oil, which appears set to proceed with Brent slipping some 2% this morning. Consequently, Brent crude has fallen over $18/bbl (-21%) because the October peak, whereas WTI crude is eying its lowest shut of the 12 months.

OPEC U-Flip

Forward of US sanctions on Iran, investor angst over potential provide shocks had risen, which in flip noticed oil costs attain 4yr highs. A lot to the displeasure of President Trump, the President had elevated his requires the likes of OPEC to spice up manufacturing to stem additional worth rises. In response to this, Saudi Arabia had complied to this, with the OPEC kingpin, alongside Russia each agreeing to spice up manufacturing forward of the imposition of Iranian sanctions, whereas US oil manufacturing additionally surged to report ranges.

Nonetheless, at the start of November, the US had introduced that they would supply waivers to eight nations, permitting them to proceed shopping for Iranian oil at a lowered charge. As such, this had lowered the potential influence that Iranian sanctions would have on oil market provide, prompting a sell- off in costs as buyers priced out dangers of upper oil costs.

Consequently, this has led to a U-TURN from OPEC, who at the latest JMMC assembly and OPEC month-to-month report anticipate provide development to outstrip demand development, implying that the bearish sentiment is about to proceed of their short-term outlook. This in flip, has seen Saudi Arabia now pledge to scale back exports by 500kbpd and name on OPEC to scale back manufacturing by 1mbpd.

Trump Jawboning

Preliminary optimism from potential oil cuts from 2019, shortly receded after additional jawboning from President Trump, stating that he “hopes, Saudi Arabia and OPEC is not going to be slicing manufacturing. Oil costs must be a lot decrease primarily based on provide”. Whereas it’s unlikely that OPEC will hearken to Trump’s jawboning provided that the cartel is warning of a provide glut, it’s doubtless that Trump will proceed to implement the view that oil should be decrease.

Brent Crude Futures Strikes Deeper into Contango

Structurally oil costs are wanting more and more bearish because the Brent curve strikes deeper into contango (Spot worth decrease than ahead worth) with the entrance month unfold now -$zero.28. In flip, this raises dangers of decrease oil costs for longer as contango markets usually sign a adverse roll yield, prompting speculators to exit bullish bets.

Crude Oil Analysis: Bearish Streak Persists as Trump Jawboning Negates OPEC U-Turn

Supply: Refinitiv, Managed Cash Positioning of ICE Brent crude futures.

HOW TO TRADE OIL MARKETS

OIL PRICE CHART: Every day Time-Body (Mar-Nov 2018)

Crude Oil Analysis: Bearish Streak Persists as Trump Jawboning Negates OPEC U-Turn

Chart by IG

Brent crude oil costs stays on the backfoot to check decrease ranges. Nonetheless, with the RSI transferring again into oversold territory, this will present a slight reprieve, which is able to enable for bears to reload shorts and check April lows located at $66.60

— Written by Justin McQueen, Market Analyst

To contact Justin, e-mail him at Justin.mcqueen@ig.com

Comply with Justin on Twitter @JMcQueenFX


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