Yahoo Finance Crude Oil Price Analysis for January 22, 2018
Crude oil futures are down for a second day, but rebounded into the close after earlier logging a 10-day low at 62.84 before bouncing. Prices bounced following a report from oil service giant Baker Hughes which showed a decline in the active rig count. Despite the bounce, prices remain below yesterday’s closing level closing down 1%. Ongoing dollar weakness helped given crude and other commodity prices an underpinning. The low was seen after the IEA forecasts crude supply to increase in 2018 in its latest monthly report, forecasting non-OPEC supply will rise by 0.2 month over month barrels per day on average. At the same time, the IEA forecast for global oil demand to remain unchanged at 1.3 month over month barrels per day.
Technicals
Prices were under pressure for most of the trading session leading into the Baker Hughes report which helped prices bounce. Prices appear to be forming a bull flag continuation pattern which is a pause that refreshes higher. Support is seen near the 10-day moving average at 63.28. Target support is seen near an upward sloping trend line that comes in near 60. Resistance is seen near the weekly highs at 64.87. Momentum has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).
Active Oil Rigs Fell
Baker Hughes reported that the number of active oil and gas rigs fell this week decreasing by 3 total rigs. This brings the total number of oil and gas rigs to 936, which is an addition of 242 rigs year over year. The number of oil rigs in the United States fell by 5 this week after gaining 10 last week, while the number of gas rigs increased by 2. The number of oil rigs stands at 747 versus 551 a year ago. The number of gas rigs in the US now stands at 189, up 142 a year ago.
EIA Forecast and Increase in Supply
The IEA forecasts crude supply to increase in 2018, saying in its latest monthly report, that non-OPEC supply will rise by 0.2 month over month barrels per day on average. While compliance in the OPEC effort to maintain supply, restrictions is expected to main high, growth in U.S. production, along with increasing output from Canada and Brazil, should underpin prices. The IEA left its forecast for global oil demand unchanged at 1.3 month over month barrels per day.
Canada saw a downtick in investment Inflow
Canada saw a $19.6 billion investment inflow from abroad in November after the $20.8 billion purchase in October, with foreign investors mostly purchasing Canadian bonds in November. Non-resident acquisition of bonds was $17.8 billion in November, with $8.8 billion of that in federal government bonds. Notably, that is the fifth consecutive month of solid investment in federal government bonds. yields have ramped higher since June, with the 2-year at 1.800% currently from 0.685% at mid-year. Canadians cut their holding of foreign investments by $4.6 billion after the hefty 16.6 billion investment in October.
Canada manufacturing shipments surged
Canada manufacturing shipments surged 3.4% in November following a revised 0.6% drop in October. The magnitude of the gain in total shipments exceeded expectations, but the risk on this report was well to the upside. A 9.1% bounce in transportation sales was the driver of total shipment growth in November, as the sector recovered following two months of declines. Leadership from the transport sector was anticipated. The transport increase was largely due to a 14.2% gain in motor vehicle assembly and a 11.3% rise in motor vehicle parts, as plants came back on-line after shutdowns in October. Petroleum and coal product shipments saw a 6.1% gain, the fifth straight monthly improvement. Chemical industry sales grew 5.9% following a 2.7% drop in October. Total shipment volumes grew 2.5% in November, which bodes well for November GDP.
This article was originally posted on FX Empire
