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PVM Midday Report 18 January 2016

Published Monday, January 18th, 2016

Headlines

  1. OPEC forecasts non-OPEC crude oil supply will decline by 660,000 bpd this year
  2. Iran issues order to boost crude oil output by 500,000 bpd following sanctions relief
  3. Secondary sources report OPEC oil output fell by 210,000 bpd to 32.18 mbpd in December
  4. Oman oil minister says ready to cut oil production by 5-10% to help stabilise markets
  5. Oil loadings from the Russian ports of Novorossiisk and Kozmino halted due to bad weather

Oil                                                                                              

Fundamentals: In its latest monthly report, OPEC has forecast that non-OPEC crude supply will fall by a bigger-than-expected 660,000 bpd this year as low oil prices take their toll on high cost producers. The oil cartel slightly raised its estimate for global oil demand growth in 2016 to 1.26 mbpd while secondary sources have reported that the group’s output fell by 210,000 bpd in December to 32.18 mbpd. Oman’s oil minister has revealed that it is prepared to cut oil output by 5-10% in order to help stabilise oil markets and comes as an Iranian oil official confirms that the order has been issued to boost crude output by 500,000 bpd following this weekend’s sanctions relief. Meanwhile, speculators have increased bets on rising ICE Brent prices in the week to 12 January by more than 9% despite a more than 15% slump in price over the same period.

Technicals: The trend is down. There are target lower on WTI 26.65; Brent to 25.05; Heat to 81.15; and Gasoil to 245.50. RBOB does not have an objective lower. It hit the target to 102.31 on Friday. Moves confirmed by closes below these targets levels would green light the next set of intermediate objectives to 16.70; Brent to 16.65; Heat to 49.30; and Gasoil to 145.00. The support is not strong and there is no reason other than things look cheap to think that the market is turning. It’s looked cheap before and the bulls have limped off the stage. The key technical indicators are negative. It is not advised to be long. Sell rallies to the 5 and 8 day MAs. Stick with the trend.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.