This week, the price of crude oil
has been relatively unmoved as traders continue to focus on a number of things.
First, they are focusing on the global demand at a time when the global growth
fears are rising. This year, major organizations like World Bank, IMF, OECD,
and central banks like Fed, ECB, RBA, and RBNZ have issued statements lowering
their forecast for the year. Last week, in the United States, there was an
inversion of the yield curve, which is usually viewed as a sign that a
recession may happen.
Second, investors have continued
to focus on the supply cuts from OPEC. The cuts emerged after the December
meeting between OPEC and Russia. At the time, the price of crude had declined
sharply, which led to an intervention from the producers who account for more
than half of the global production.
Third, there are concerns about
Venezuela. This year, the Trump administration imposed a number of sanctions
that have helped reduce the amount of crude oil produced in the country. This
week, the country’s presumed president was banned by the government against
running for president for another 15 years. He is also banned from other
political actions in the country. This may increase the tensions that are there
between the US and the Venezuelan government. This is because the US and other
Western countries have recognized him as president already.
Fourth, data from the US this
week was mixed. Last week, Baker Hughes released a report showing that the
number of rigs had declined in the past week. In fact, the rig count has been
on a downward trend this year. This week, data from the country showed that
inventories had moved up. The data from American Petroleum Institute (API)
showed that inventories rose by 1.9 million after declining sharply in the
previous week. This was followed by that of the Energy Information
Administration (EIA), which showed that inventories had risen by 2.8 million
barrels.
Yesterday, Donald Trump sent a
tweet asking OPEC to start boosting production. This was the second such Tweet
from the US president. However, it is unlikely that OPEC will listen to Trump
now that the supply cuts have helped rebalance the prices. In addition, the
whole debate on the killing of Jamal Khashoggi has eased a bit.
Yesterday, the price of WTI crude
oil declined to $58.20 after Donald Trump sent the OPEC tweet. The price then
recovered slightly and reached a high of $60. In the chart below, the WTI pair
is slightly above the 21-day and 42-day moving averages. The RSI has climbed
closer to the overbought levels. In the near-term, the pair will likely
continue moving upwards.
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