Crude Oil Price Analysis for December 12, 2017
Crude oil prices moved higher on Monday but continues to trade in a tight range at elevated levels. Inventory data over the past few weeks has been mixed, but what is clear is that refiners are running at higher than normal levels in an effort to take advantage of large refining crack spreads. The demand remains robust for product, which his keeping crude prices higher but there are member of OPEC that want to overproduce, which when combined with robust U.S. production, could weigh on prices.
Technicals
Crude oil is trading in a relatively tight range, capped by resistance near a downward sloping trend line near 58.70. Support is seen near the 10-day moving average at 57.39, and then an upward sloping trend line that comes in near 56.10. Negative momentum on crude oil prices is decelerating as the MACD (moving average convergence divergence) is printing in the red, with an upward sloping trajectory which points to consolidation.
OPEC Deal is on Shaky Ground
It only been a couple of weeks since OPEC met and Libya pledged to cap its crude oil production at the level of 1 million barrels daily, Libya has sent a signal that it actually has immediate plans to raise this. The Prime Minister of the UN-recognized Government of National Accord met with the heads of the National Oil Corporation and the Libyan central bank to discuss funding for boosting crude oil production.
To add to this, the overall political situation in Libya in the country remains unstable. This prompted analysts to factor in possible future oil production outages in the country in their overwhelmingly bullish oil price forecasts for 2018. Libya, along with Nigeria, was originally exempted from the OPEC oil production cuts, agreed last November. The country, like Nigeria, is heavily dependent on oil revenues and was strugglingwith a rising budget deficit and soaring inflation amid continuing conflicts between various armed groups.
However, optimism seems to be prevailing at the moment, and as Russia’s Alexander Novak told the media in Vienna, OPEC and its partners had factored in an increase in U.S. shale production, the spearhead of growing overall production in the world’s largest oil consumer.
The Japanese BSI Increased in November
The Japanese business survey index of sentiment at large manufacturers stood at plus 9.7, up from plus 9.4 in July-September, according to the Ministry of Finance and the Economic and Social Research Institute. The buoyant mood coincides with a record economic expansion: gross domestic product climbed an annualized 2.5% in July-September for the seventh straight quarter of growth, the longest rising streak in data going back to 1994. A big contributor to growth during the quarter was capital spending. Monday’s survey shows that big manufacturers plan to raise capital spending by 10.7% in the current half of the fiscal year ending in March, up from their previous projection of an 8.9% increase.
Chinese Exports Increase Buoying Oil Prices
China’s exports and imports unexpectedly accelerated in November, though analysts expect growth to continue cooling amid a government crackdown on financial risks. Exports in November rose 12.3% year over year which was the fastest pace in eight months, led by strong sales of electronics and high-tech goods. The actual export release beat expectations that they would rise by 5% compared to a 6.9% rise in October. Imports increased by a rapid 17.7% year over year pace in November, according to the General Administration of Customs well above expectations of 11.3% growth and rising at the fastest pace since September.
This article was originally posted on FX Empire
