Oil Slips On Libya’s Crude Output Partial Recovery

By: Eddy Peng Mar 8, 2017
Crude oil prices continue to trade off of yearly highs, but still stuck in a narrow range without significant breakout for the 2017 trading year. On Tuesday this week, oil dropped moderately by nearly 0.7 percent, with closing at 52.521 which was approaching the recent bottom. Crude has now fluctuated above $50 a barrel since the OPEC (Organization of Petroleum Exporting Countries) and other producers started trimming output on Jan. 1. Oil declined after an industry report showed that U.S. crude inventories climbed. Supplies rose 11.6 million barrels last week according to an American Petroleum Institute report Tuesday, people familiar with the data said. However, this contrasted with analysts who said stockpiles probably rose by only 1.39 million barrels from Energy Information Administration data on Wednesday. “If OPEC can stick to its cut and shale output doesn’t climb more than expected, oil can break to the upside,” Tim Pickering, founder and chief investment officer of Auspice Capital Advisors Ltd. In Calgary, said by phone. Until the beginning of this week stimulus for the support of the Oil price has been a hope that OPEC would extend supply cuts beyond summer of the Northern Hemisphere. Nevertheless, Suhail AL Mazrouei, UAE Minister of Energy cast doubt on the certainty that OPEC will extend cuts. He said the level of inventories is dropping slower than expected, which is likely either to the aggressively supply from the US Shale or the lack of demand. Crude production of Libya, a member of OPEC, made a partial recovery after clashes between rival armed groups, which resulted in a halt in shipments from two of the OPEC member’s biggest oil ports. Crude output, from oil fields operated by Arabian Gulf Oil., an NOC unit known as Agoco, rose on Tuesday to 673,200 barrels a day from 663,000 the previous day, said Jadalla Alaokali, a board member of Libya’s National Oil Corp. Agoco had a plan of production curtailment in recent days due to security concerns, but output should rise further in coming weeks with oil from the Abu Attifel field operated by Mellitah Oil & Gas Co. However, Riccardo Fabiani, a London-based senior analyst at consultants Eurasia Group, held the different view of that plan for raising output. “There has been a big uncertainty over the oil ports, and that is extremely negative,” he said. “The oil market will assume that all the claims by the NOC to increase production to a million plus barrels per day are obviously impossible to implement.” Additionally, Iran’s crude-oil exports increase as well, jumping to the level last seen in 1979 Islamic Revolution. Iran in November won an exemption from output cuts agreed on by the Organization of Petroleum Exporting Countries, as it was still recovering from sanctions. Another key news for this week includes the release of US employment data this Thursday. The expectation for US Crude Oil Inventories (MAR 03) is set at +1501k, while the US Unemployment Rate is set to be released at 4.7 percent. Technically, the price of crude oil remains in an ongoing daily narrow range, which is depicted below. Current daily resistance remains located at the January 3 peak of $54.584 this year. Alternatively, crude oil prices remain supported above the January 10 low at $50.363. If prices continue to ping at this interval, traders may keep an eye on these points for a potential market breakout. ACY-WTICOUSD-Daily-080317 Oil Slips On Libya’s Crude Output Partial Recovery

Chart 1: WTICOUSD Daily

Currently, short term momentum is pointed downside, with the price of crude remaining under the 5-day MA (Moving Average) found at 52.521. If prices continue to decline this week, it may return to support and potentially breakout lower. Alternatively, if prices remain supported, traders may look for crude oil to bounce and retest resistance at the 2017 high of $54.584.
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