Whats Driving Oil Prices?

Published date: 22/01/2019
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The oil market is in a very fine balance point at the moment. Since we entered the new year sentiment has been positive as Russia and Saudi Arabia have said they are looking to bolster the market by cutting production. Not only this, at the last OPEC+ meeting the cuts were said to have been agreed at 1.2mln barrels 800k from OPEC and 400k from non-OPEC including the Russians. Yesterday the IMF had issued a warning on global growth, they stated a slowdown of growth in China and trade issues are hurting the world economy. Oil markets have reacted by selling off, WTI has lost 2% of its value today and prices hover around $52.80/bbl.

Since then, US inventories have been stalling and production levels seem to be changing from week to week. Russia has not managed to cut by the amount agreed saying technical factors mean that it has to be done slowly, however, they do say it will be done.

America is now the worlds largest oil producing nation overtaking the Saudi's and Russians with the rise in shale production. In the last IEA monthly report, the IEA hinted that Shale production could have it its peak or will do so in 2019.

So where next for the liquid gold?

The weekly chart is showing that $54.43/bbl is a strong resistance level for now.

If we get more clarification at the next OPEC meeting we could get a move higher. It has been said the cuts will be extended or even deepened. This could make us look to higher levels with $59/bbl the next resistance on the chart. If OPEC under deliver the base of $42.20bbl could come into play again. Today the oil markets are retracing and look like they are not holding their breath as any agreement will be hard to reach and draw out. 

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