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Politics : Liberalism: Do You Agree We've Had Enough of It?
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From: tonto2/12/2018 9:53:51 AM
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Crude oil prices experienced one of the worst weeks in the past year, dropping nearly 8% in early trade on Friday. Strong production data reported this week by the Department of Energy, was likely the catalyst for the selloff although the general risk off trade also played a role. An overleveraged market environment that was betting on continued low volatility was unwound during the week, leading to a selloff in all riskier asset. There continues to be a tug of war between OPEC and U.S. producers. While imports continued to drop this week, U.S. production topped 10-million barrels a day this past week. The accelerating momentum has prodded the EIA to increase its production estimates in its annual energy report.

TechnicalsCrude oil prices tumbled through support, breaking through the 59 level, after easly moving through the 60-handle. Prices are poised to test support near the 50-day moving average at 57.22. Resistance is seen near former support which is an upward sloping trend line that comes in near 61.75. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices. The RSI (relative strength index) moved lower with price action and is fast approaching the oversold trigger level of 30.


Rig Counts Increased The EIA forecasts that the U.S. will be a net exporter by the early 2020’s following 66-years of being a net importer.

Baker Hughes reported a staggering increase to the number of rigs. The number of active oil and gas rigs increased by 29 to Baker Hughes data. This brings the total number of oil and gas rigs to 975, which is an addition of 234 rigs year over year. The number of oil rigs in the United States rose this week by 26 with the number of gas rigs increasing by 3. The number of oil rigs now stands at 791 versus 591 a year ago. The number of gas rigs in the US now stands at 184, up from 149 a year ago.

EIA Increase Production EstimatesIn its annual energy outlook, the EIA revised its production estimates to show that the average for 2018 will surpass the 9.6 million barrels per day record set in 1970 but will plateau between 11.5 million barrels of oil and 11.9 million barrels a day. The continued development of tight oil and shale gas resources supports growth in natural gas liquids production, which reaches 5.0 million barrels a day in 2023 which is approximately a nearly 35% increase from the 2017 level.

Production levels will depend on several factors including price. Continued economic growth will keep demand steady and the standoff between the U.S. and OPEC will determine if prices can remain near $60 per barrel on a WTI basis. The EIA believe that U.S. crude oil production will level off between 11 million and 12 million barrels per day as tight oil development moves into less productive areas and as well productivity declines. Declines in imports have been outpacing the rise in production levels which has kept oil prices buoyed. The EIA forecasts that the U.S. will be a net exporter by the early 2020’s following 66-years of being a net importer.
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