Crude oil prices continued to grind higher this week following comments from Saudi Arabia and reports of a slowdown in Libya’s exports. Last week, production declined and there was only 1-new oil rig added this week. Crude oil inventories last week showed an unexpected draw, while demand remains very robust.
Crude oil prices started the last week of February on a positive note, pushing higher closing up 0.5% after testing the 64 handle. Resistance is seen near a downward sloping trend line that comes in near 65.20. Support on crude oil prices is seen near the 10-day moving average at 61.59. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day exponential moving average minus the 26-day exponential moving average) crosses above the MACD signal line (9-day exponential moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.
OPEC Production Could be Lower
Crude oil started the week with gains thanks to comments from Saudi Arabia’s Energy Minister Khalid al-Falih and reports of a slowdown in exports from Libya’s Mellitah oil terminal. On Saturday Al-Falih said that Saudi Arabia’s oil production over the first three months of 2018 would be much lower than the amount allowed under the 2016 production cut agreement. Al-Falih added that exports were estimated to average 7 million bpd in the three-month period.
At the same time, the minister said he hoped OPEC and its partners could relax the production restrictions in 2019 and progress on the permanent cooperation framework that was mentioned earlier this year.
Libyan Production Slows
Meanwhile, protests at the El Feel field in Libya have led to the introduction of a force majeure at the 90,000-barrels per day field, affecting exports from Mellitah. The National Oil Corporation said in a statement that loadings at Mellitah will be “modified” in accordance with events at El Feel.
Oilfield guards are protesting against low pay and the lack of additional benefits. NOC’s chairman Mustafa Sanalla, however, said that the guards are under the authority of the Ministry of Defense, so it should be the one responsible for their compensation.
Libya is producing around 1.1 million barrels per day currently, and disruptions in its production are widely seen as one of the strongest tailwinds for oil prices at the moment. The political situation in the North African country is still very fragile and volatile, which makes production outages likely in the coming months and perhaps years.
NAFTA talks have resumed, this time from Mexico
Globeandmail.com reports that President “Trump’s combative call with the Mexican president cast a shadow over NAFTA talks.” While headlines of this nature have become almost standard as the talks drag on and on, news from the negotiations joins a busy mix of data and events this week that include the Federal budget and Q4 GDP.
Chicago Fed’s national activity index dipped slightly
Chicago Fed’s national activity index dipped slightly to 0.12 in January, after falling to 0.14 in December which was revised form 0.27 and to 0.24 in November which was revised from 0.11 from a peak of 0.91 in October which was revised from 0.87. The latter is the highest since December 2006. The index suggests little change in economic activity. on the month. As for the components, 40 of the 85 made positive contributions, while 45 were negative.