Oil Rallies as Iraq Pledged to Comply With Oil Cut Deal
By: Eddy Peng Apr 3, 2017
Chart 1: WTICOUSD Daily
An overhang of an estimated 285 million barrels of oil in storage has been dragging crude prices even as OPEC and some non-members producers curbed output. Six members of OPEC extended oil cuts beyond June last year, with Saudi Arabia and Kuwait saying oil stockpiles need to fall to the five-year average. Crude stockpiles are commencing to decline after a sign that the implement of production cuts this year is bringing the market to balance, according to OPEC’s Secretary-General Mohammad Barkindo. Crude is experiencing its biggest rise last week amid OPEC announced its extension on the deal to curb output, even though a U.S. government report showed the nation’s refineries boosted its use by the most in almost three years while fuel supplies fell. Morgan Stanley mentioned in a report that crude stockpiles, including in China, Japan and floating storage around the world, have declined 72 million barrels this year. Iraq has pledged to have full compliance with oil cut deal in order to bolster crude prices, according to OPEC Secretary General Mohammed Barkindo’s statement on Sunday in Baghdad. While it is committed to achieving 100 percent of its target production, it will start to proceed with projects to increase its production capacity to 5 million barrels. As can be seen in chart 2, U.S. Index is currently at downward equidistant channel, and simultaneously technically facing a key resistance at MA60 for a potential reversal this week if it fails to break out, amid the rising concerns over President Trump’s next move on tax cut.
Chart 2: US Index Daily
Technically, crude oil is basically trading by following the upward equidistant channel. If it continues to rally next couple of days, crude will be facing the resistance found at MA60 for potential breakout. Traders should keep monitoring its movement if breakout succeeds.
Chart 3: WTICOUSD Daily
Sentiment analysis for crude oil prices shows the majority of traders positioned net long. The current SSI ratio seen below stands at +1.83. With 64.7% of traders positioned long, this suggests that crude oil prices may be positioned to again decline. In the even that a bearish breakout occurs, traders may look for SSI figures to shift towards new positive extremes of +2.0 or greater next week. Alternatively if it pushes higher, it would be expected to see sentiment ratios shift back and the potential move to a negative reading.
Chart 3: Oil – US Crude Client Positioning
