Hi, babypipsters!
I would like to share my views on how can things evolve on oil market. My trading and analytics approach is simple - digesting OPEC and other trusted sources data while using tehnically sound S/R lines.
The thread will be periodically updated.
Here is my fresh view on near and medium term future of the oil market:
OIL MARKET REVIEW: OVERSUPPLY MAY TURN TO DEFICIT?
The oil market has been facing a deficit of crude oil for the third quarter in a row, OPEC reported in its monthly review on Thursday.
According to the organization research, the demand for black gold outpaced supply by 0.9 million barrels per day in the fourth quarter of 2017. According to the cartel’s forecast, world oil consumption in the first quarter of this year will amount to 97.2 million barrels per day. Decrease in demand compared to the fourth quarter of 2017 may result in a supply glut. For example, if the volume of production in OPEC does not change, then it can be equal to 0.6 million barrels per day.
OPEC also adjusted its forecast for the shortage in the second and third quarters. If earlier it was equal to 0.4 and 1.1 million barrels per day, respectively, according to new projections it is 0.3 and 1.2 million barrels.
Let’s take a look at the supply-demand balance constructed by OPEC:
Further reading: Oil market review: oversupply may turn to deficit - Broker Arena
1 Like
Narrowing debt spread and boom and bust cycles
US debt market experiences significant changes – an U-turn happens after decades of downward trend in Treasury yields. But why it can be dangerous?
Treasury yields has been declining for more than 30 years. The trajectory was strictly downward which briefly reversed only during mortgage crisis in 2006-2007 but then returned to global slump.
Fixed income market bears more significance than stock market because of higher sensitivity to risk. Therefore we can observe the change of core trends firstly on debt market and then on markets with higher yields.
Rising yields means a selloff of debt issued earlier as investors seek for higher yields. From the summer of 2016, Fed interest rate on 10-year Treasuries doubled from 1.3% to 2.6%. As the Federal Reserve took path of normalizing rates, bond price declines as the discounted value of future coupons decreases.
Read further Narrowing debt spread and boom and bust cycles - Broker Arena
1 Like
Saudi Arabia Oil supplies
After a short break Saudi Arabia continued to increase oil exports from the country.
According to JODI, the Middle East Kingdom supplied to the world market more than 7 million barrels per day in November, marking the growth of export for two consequent months.
Recall that in September last year, oil exports from Saudi Arabia fell to the lowest level since the spring of 2011, after it began to gradually recover. This was done to balance the oil market, pressing stockpiles below the five-year average. According to calculations by Citigroup, last year the size of crude oil stockpiles fell below the average level of the last five years, but OPEC official figures show they are still higher, that is, it is too early to weaken the grip.
It is increasingly difficult for OPEC pact members to resist the temptation to break commitment when prices are rising. However, the increase in exports from Saudi Arabia is most likely due to the seasonal factor and the high demand for energy.
Traditionally, in the first months of autumn, refineries in the Kingdom undergo maintenance work, which leads to a decline in exports. Given that in the fourth quarter of 2017 there was an undersupply of crude oil by 0.9 million barrels per day, the growth in supplies from the kingdom did not significantly affect the global supply.
Further reading: Oil market review: Saudi Arabia exports and technical picture - Broker Arena
10YR-2YR Treasury spread – what it means for the market?
American stock markets are heading for a U-turn and 10YR-2YR Treasury spread poses a biggest threat.
The bond market has a much greater impact on the economy than the stock market, especially in the United States since US companies rely chiefly on debt financing rather than by selling stocks. Often a bad tendencies on it precedes the reversal of stock market indices, and their drop or rally leads to the decline/rebound of the GDP as it dampens the value of savings of Americans which is mostly held in equity securities.
In a normally working economy, the cost of short-term borrowing is cheaper than long-term debt rate because of risk-premium. However, when things get heated, the yields on short-term and long-term bonds lose difference, i.e. 10YR-2YR Treasury spread narrows. Investors doesn’t care about time and start to hunt for higher yields.
Further reading 10YR-2YR Treasury spread as "market collapse" indicator | Brokerarena
Smart money flow indicator – technical implication
Before we start talking about dollar, stocks and Smart money flow indicator I would like to share with you a quick set-up for AUDUSD before RBA cash rate decision on Tuesday.
The reason to be bullish on AUDUSD is a lag of RBA policy comparing to its counterparts like ECB or Federal Reserves, what may cause money outflow from the Australia what is not good. The policymakers in Australia will be possibly forced to support AUD with hawkish comments after a long dovish period.
Continue reading Smart money flow indicator sends warning signal for Dow | Brokerarena
Oil price forecast for today-
Oil is trading in the correction to a short-term uptrend. Yesterday, traders tested the Additional Zone 80.00 - 79.87. This zone was broken out today. Now the price is rolling back up and testing the broken-out zone as resistance.
I recommend considering oil sales in the zone of 79.87 - 80.46 with a target in the Intermediary Zone 78.72 - 78.46. It would be reasonable to take a part of profits at today’s low.
To enter purchases, it is required to break out the resistance zone 80.59 - 80.46. In this case, it will be possible to expect the price to reach level 81.13.
[Removed for Forums Policy violation]
