WTI: Traders concerned over the lack of country-specific targets for production cuts

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  • West Texas Intermediate is currently trading at $51.76, up from a low of $50.84 – The session high is $52.58.
  • U.S. crude oil production will average nearly 11 million barrels per day in 2018 – EIA

West Texas Intermediate, (WTI), prices are moving sideways on Tuesday within a relatively narrow range, and a phase of consolidation as the price looks to stablise following the more-than-30% plunge by oil prices from a nearly four-year high hit in early October.  WTI’s January delivery contract

was up 63 cents, or 1.2%, at $51.63 a barrel on the New York Mercantile Exchange, after trading as high as $52.43. This was an improvement on Monday’s price action where it lost 3.1% to settle at $51, the lowest since Nov. 30 as traders quickly move don from an unimpressive production cut from OPEC+ and preferred to look at the bigger picture.

Traders are concerned over the lack of country-specific targets for production cuts nor tangible evidence of supply reductions, mainly from Saudi Arabia and Russia. This follows OPEC agreeing to reduce its overall member production by 800,000 barrels a day from October’s levels for six months, which will start in Jan 2019. However, there were no specific output cuts by nonmember allies, which include Russia. We only have numbers of what the nonmember cuts should look like, at 400,000 barrels a day.

EIA forecasted an average 2018 WTI price of $65.18 per barrel

Meanwhile, the Energy Information Administration’s Short-term Energy Outlook report has forecasted an average 2018 WTI price of $65.18 per barrel. The data is lower than the 2.4% from the November report’s forecast. It also cut its 2019 view by 16.4% to $54.19. “EIA’s December short-term outlook largely attributes the recent decline in Brent crude oil spot prices, which averaged $65 per barrel in November, to record production among the world’s largest crude oil producers and concerns about weaker global oil demand,” Linda Capuano, EIA administrator, said in a statement.

EIA leaves 2019 US crude output estimate unchanged at 12.06 mbpdOil futures climbed on Tuesday, finding some support from a short-term disruption in Libyan output, but trading off the session’s high on the back of uncertainty surrounding compliance with an oil-producer agreement to cut output, as well as concerns over a potential slowdown in energy demand.

Meanwhile, in a report issued Tuesday, the Energy Information Administration reduced its oil-price forecasts for this year and next, following the recent price declines that came ahead of Friday’s decision by the Organization of the Petroleum Exporting Countries and some nonmember allies to cut production starting in January.

WTI levels

  • Support levels: 50.27 49.41 48.05
  • Resistance levels: 52.49 53.85 54.71

The 23.6% Fibo retracement of the recent rout from just below the 77 handle at 56 remains a key upside target while the 21-D SMA has moved lower to 53.47, keeping the price pressured below it. The daily & weekly RSI remains above 30 while monthly RSI and DMI remain slightly less bearish. The 123.6% Fibo extension target comes in at the 43.90s while the June 2009 lows are nearby at 41.83. On the wide, the 161.18% Fibo extension target is situated at 33.77, and the Jan 2016 low is down at 26.03.

 

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