OIL: Is The Price Set to Rise?

Published date: 07/01/2019
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Oil has had a very turbulent year as many investors thought the commodity was going to peak towards the $100 a barrel mark following an eclipse of the $77 a barrel (WTI Benchmark) achieved in October. Since the Peak Oil prices have dived in the last three months, this is in light of roaring production growth in the US and hazed global economic uncertainty weakening demand. Both of these factors will endure in 2019. OPEC has attempted to steady prices by agreeing to cut output starting on 1st of January 2019.

The current oil prices are being heightened by a sense of optimism of the higher-level trade talks between the US and China on January 7th to 8th in Beijing. A sense of urgency of the deal looms before a global recession may strike. As seen in 2008 a recession can cause the price of commodities to rise whilst stock prices plunge. However, a strong US Non-Farm Payroll of 312k would suggest the US economy is continuing momentum and this may fare well for the future demand for crude oil.

The price in 2019 does depend on the effectiveness of OPEC’s attempts to stabilise the market with supply cuts. Many reports suggest that the US will continue to increase production of oil throughout 2019 whilst Saudi have cut production from January 1st. The strength of the US shale Industry and President Trumps decision to tighten US sanctions on Iran will impact the price of Oil we will see in the markets throughout 2019. The Well-being of the global economy and therefore the strength of global demand will Overshadow the above influencing factors.

In the imminent future ultimately, the price of oil is likely to be dictated by the outcome of US and China Higher trade talks. Additionally, the tone of the US Federal Reserve will impact the price of crude oil alongside stock market prices.

 

Technical Outlook

We saw Oil find support at $42 a barrel bottom and since then Bulls have gained momentum giving the price of crude a minor recovery to $48.19 whilst testing the $49 level. A week of Bullish price action could continue into the upcoming week depending on the outlook of the Trade talks on the 7th to 8th of January. A rejection of $50 level is foreseeable with then the market creating a new higher low around $48 level. However, a clear break and close above the $50 level will see bulls shortly take over and price to rally to the next highlighted zone of $54 to $56 a barrel level which is also in line with our EMAs.

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