Oil suffered from the volatility this week…
Oil market overview
Oil futures advanced for an eighth consecutive session on Monday. It is the longest winning streak of the year. WTI crude was trading up 0.3% at $46.22 per barrel on the NYMEX. Brent futures were 0.3% higher at $49.05 per barrel in London.
Major tailwind factors:
US oil industry
Oil prices rallied mainly due to the slowdown in the US oil production. Prices were already rebounding after official data published Wednesday showed total US crude production dropped by 100K barrels per a day (though many analysts refused to join jubilant traders saying that the fall is temporary; there was a storm in the Gulf of Mexico that disturbed the oil industry’s activity). Baker Hughes data released on Friday indicated that the number of active US rigs drilling for oil declined by 2 to 756 in the past week (which is the first drop in 23 weeks!). These 2 rigs fanned the flame in oil market and pushed oil prices higher. Famished Bulls have finally made a good haul on the falling output in the US oil industry.
Major headwind factors:
Some investors remain skeptical about the continuation of the oil prices’ rally for compelling reasons. There is a potential for an increased output from Libya and Nigeria, members of the OPEC exempt from the OPEC-led output cut agreement. Libya’s oil production spiked to more than 1 million barrels a day for the first time in 4 years due to the reopening of the country’s largest oil field Sharara. Libya’s production is seen rising additional 300K barrels a day on average for the third quarter compared with the first quarter.
Qatari problem is still not resolved
On Monday, Qatar missed a deadline to comply with a list of demands from the Saudi-led alliance that blockaded the emirate since June 5. Saudi Arabia, Egypt, Bahrain and the United Arab Emirates accused Qatar of supporting the terrorist groups and having close ties with Iran.
The US policymakers confirmed that Qatar has funded Al Qaeda affiliates in Syria and some elements of ISIS – the very terrorist groups the American troops are bombing striving to liberate northern Iraq. Qatar also supports Hamas, Yemen-based Houthi rebels (which are against the Saudi regime), offered a sanctuary to the Muslim Brotherhood leaders and other spiritual guides of terrorists.
All these activities might have been tolerable, if not Qatari support of Iran. When Iran was under embargo, Qatar continued to sell Iranian natural gas to power-starved Europe. Having recognized that shipping the fuel resources by sea is costly, slow and very risky, Qatar proposed a building of a pipeline across Syria to move Iranian energy products to the European markets. But Syrian civil war and disobedience of Bashar Al-Assad made Qatar and Iran give up on their plans. In short, Qatari support destined for Iran was the last straw for its Arab neighbors. They demanded Qatari officials to stop financing the terrorists, backing armed uprisings between Sunnis and Shia groups.
There isn't any reversal pattern so far. If the 21 MA acts as resistance, we're likely going to have just another decline...
Expanding bullish Ichimoku Cloud with rising Senkou Span A; a cancelled golden cross of Tenkan-sen and Kijun-sen; the prices are returned to the support of Tenkan and Kijun and may go higher.
Narrow bearish Ichimoku Cloud with horizontal Senkou Span A and B; a golden cross of Tenkan-sen and Kijun-sen, but the lines are horizontal; the Bulls can’t breaking out the resistance of upper border of the Cloud and the market may return to 113.00.