Vang SJC

Oil prices have fallen for the straight second day since the beginning of this week. This gives a signal that the steep rally in the eighth month of 2016 is about to die down. Failing to break through the level of $50/barrel one more time on last Friday (19/8), WTI crude oil has reversed and followed a down-move for now. On Monday (22/8), this commodity skidded nearly 3.5%. Price currently is continuing dimming to the reading of $47.03/barrel.

wti d1

Fig. WTI D1 Technical Chart

The main reason for the stop of the three-week ascending is the rising concerns that the upcoming meeting among major oil suppliers would not reach any consensus of “freeze-output” plan.

Inside OPEC

Previously, Saudi Arabia – the largest producer in OPEC– stated that there would be an informal OPEC meeting in Algeria in September. There are also som non-OPEC producers as Russia attending. The meeting is  to discuss on the plan of curbing the global oil production, supporting the market to return into balance.

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However, investors now are skeptical that the meeting might not yield any concrete action to reduce the current glut due to disputes between this cartel’s members Saudi Arabia and Iran. Earlier this year, Iran refused to join the OPEC meeting on “freeze output” plan in June, persisting in boosting their production in order to regain its market shares it held before the U.S. and European Union tightened sanctions on its oil industry in 2012. For the upcoming attempt, this country continues to express its defiance of OPEC, dampening the hopes of production cut in the next month.

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Besides, Iraq’s preparation to ramp up exports and likely follow-up movements in Nigeria also are the causes of fading market expectations. According to recent reports of the International Energy Agency (IEA), Iraq posed a significant increase of 80,000 barrels to 4.33 mbpd in July, compared to the preceding month.

Outside OPEC

A continuing deluge of products from China also added to the supply worry as this nation announced that its total gasoline exports in July edged up to 970,000 metric tons, equivalent to 230,000 barrels per day, doubling from one year earlier. Diesel exports tripled to 1.53 million metri tons, equivalent to 362,000 barrels per day.

By the meanwhile, Baker Hughes Inc. by the end of the past week released its weekly report on total oil rigs in the US. The latest data came in with a rise of 10 ones from the period prior to an amount of 406 rigs in the week ending on August 19th. This is the highest figure in over the last six months, indicating that US drillers are on course to strive up and the output from America may soar up strongly.

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Fig. Total rig count in the US

This day today, the American Petroleum Institute (API) will release its estimates US crude and refined product inventories in the past week. Following that is the more closely data from the Energy Information Administration (EIA) out on the next day. The crude stockpiles in the US could fall down slightly 0.7 million barrels in the August 15-19 week, revising from a sharp decline of 2.5 million barrels before.

While the supply side remains excessive, the demand is witnessing a slowdown as the driving-season is about to end in a few weeks and the contraction in China’s demand ahead of G-20 summit. On the fourth and fifth day of September, a meeting among the governments and central banks governors from 20 major economies will take place in Hangzhou. To ensure blue skies when the red carpet is rolled out, Chinese authorities have orders hundreds of factories to curb their activity and weakening imports in oil of China is foreseen.

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Oil demand is likely to be affected by the new fuel efficiency standards for heavy trucks in the US, which was formalized last Wednesday. The rules called tractor-trailer rigs for a 25% reduction in emissions with the expectation of save the tracking industry $170 billion while cutting fuel consumption by 2 billion barrels.

wti h4

Fig. WTI H4 Technical Chart

Technical Analysis

By the end of the past week’s trading sessions, WTI pulled back down, broke the up trendline since the start of August and dropped promptly from the resistance of 49.39. After a brief consolidation as the European coming in the market today, WTI is resuming its downtick. The buyers’ power seems fairly weak as the bodies of two up candles are quite shorter than usual. The two moving averages also pierced the price movement from under and now is casting a shadow on the commodity.

wti h1

Fig. WTI H1 Technical Chart

On the hourly chart, RSI (14) indicator might return to oversold zone after having just got out of from this territory,. It indicates that the bear is on track to take the lead in the market once again as gathering enough energy. The PFM signal trend since early this week has suggested short positions on WTI via a red arrow hanging over the price chart. Up to now, there are about 15 pips accumulated. The support area of 46.67 is about to be tested.

Analyses of Group Fiinvesting

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