Jump to content

Crude Oil Forecast: WTI May Resume Climb on OPEC’s Dwindling Spare Capacity


Recommended Posts

CRUDE OIL, WTI, OPEC, SPARE CAPACITY, RSI DIVERGENCE - TALKING POINTS

  • Global oil prices drop after OPEC signals releasing more barrels in March
  • OPEC members struggle to pump allotted amounts as spare capacity drops
  • Technical outlook shows possibility for more weakness on RSI divergences
Crude Oil Forecast: WTI May Resume Climb on OPEC's Dwindling Spare Capacity

Crude oil prices are moving slightly lower through Asia-Pacific trading on Thursday, extending losses from Wednesday when prices nearly hit $90 per barrel before retreating. The downside comes after OPEC, and its allies, collectively known as OPEC+, signaled they would open the supply taps further in March at the pace of 400k barrels per day. Brent prices – the global benchmark – continue to trade at a slight premium to WTI.

The pullback in prices may be short-lived, however. That is because OPEC countries are struggling to pump as much as allowed per the cartel’s quota limits, caused by years of underinvestment and recent supply disruptions in Libya and the UAE. At the same time, demand for oil and other fuel products continues to increase, pressuring already strained inventory levels.

Space capacity among OPEC members – defined as the production available within 30 days, with a sustained period of at least 90 days, per the EIA – has fallen near the lowest levels seen since the pandemic started, and most of that spare capacity is concentrated in Saudi Arabia, Kuwait and Iraq. OPEC’s ability to adjust to major supply disruptions diminishes as that capacity drops. That said, the current pullback may be short-lived given the precarious global supply structure.

OPEC spare capacity

 

POSSIBLE EVENT RISKS FOR ENERGY TRADERS:

  • Next OPEC meeting for April production on March 2
  • Russia/Ukraine situation, oil-related sanctions
  • US oil rig count on February 4 (Baker Hughes)

WTI CRUDE OIL - TECHNICAL FORECAST

Oil prices could be susceptible to a bigger pullback when examining the technical structure, given multiple bearish divergences between price and the Relative Strength Index (RSI). The lower lows on the RSI oscillator compare with higher highs in price, which suggest slowing momentum. That doesn’t necessarily indicate a drop is about to occur, but it is bearish nonetheless.

A break below the 12-day Exponential Moving Average (EMA), which has supported prices since late December, may trigger a move lower, however. A drop to the 23.6% Fibonacci retracement may be on the cards in that scenario. Alternatively, should prices resume moving higher, the psychological 90 level is a likely area of resistance.

WTI CRUDE OIL – DAILY CHART

wti technical chart

Chart created with TradingView

 

Written by Thomas Westwater, Analyst for DailyFX.com. 3rd Feb 2022

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
      20,131
    • Total Posts
      88,226
    • Total Members
      69,116
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    vinprabhu
    Joined 06/10/22 04:45
  • Posts

    • Stock markets remain in a more bullish pattern after the losses of recent weeks, and Asian indices made some more progress, albeit in a more tentative fashion. Oil prices remain on an upward path following OPEC's move to cut output by two million barrels per day, pushing prices to their highest level since mid-September. Stronger data in the form of the ADP report and the ISM non-manufacturing PMI caused a wobble in stocks, which have rallied on fresh hopes that the Fed will pivot away from its hawkish policy in the near future. Today is a quieter day, with just the UK construction PMI and weekly jobless claims, and the focus is now shifting to tomorrow's non-farm payroll report.   
    • Scallops Chart Pattern are J-shaped, inverted J-shaped, or mirror J-shaped continuation patterns that appear often during trending markets. This pattern has a steep momentum and a rounded bottom or top. The structure is pretty smooth at first, then the market begins to rush up with significant momentum, or vice versa. Scallop patterns appear less frequently than other continuation patterns such as flags or pennants, yet they are among the most stable forms.   Types of Scallops Chart Patterns There are four types of Scallops, two of which suggest bullish movement, while the other two imply bearish movement.   Ascending Scallop Pattern Inverted Ascending Scallop Pattern Descending Scallop Pattern Inverted Descending Scallop Pattern Read More -   Scallops Chart Pattern    
    • For more up to date news on how markets will open, the latest earnings and economic news, watch IGTV live in the platform at 07:30am UK. Today’s coverage:   UK outlook revised to negative by Fitch Indices: European stocks to open up after small drop yesterday. Recession fears still haunt mkts after eurozone PMI data yesterday. APAC mostly up   FX: USD holds recent gains. EURUSD pulls down from parity. Rtrs poll says GBPUSD will climb next year BUT could challenge parity later this year. Equities: Earnings – LEVI STZ. CSGN still under pressure as CDS climb again Commods:  Oil up after OPEC+ delivered 2mln barrel cut. Gold bumping up against 50 day sma      
×
×
  • Create New...