WTI: Bulls capped at the 200-hour moving average
- Conflict in Middle East underpins upside case.
- WTI bulls tiring and need a further catalyst to fight off US shale production bias.
The price of a barrel of oil is topping out just below the 200-hour moving average and a prior support structure earlier in the month as traders get set for the EIA monthly report that will include an estimate for February shale oil production. West Texas Intermediate crude is currently trading at $58.51 having travelled between a low of $57.74 and $58.83.
Middle East conflict bid tiring
Traders are still concerned for the level of rising global supplies and the conflicts n the Middle East while keeping a close eye on 2020 global economic growth. We have seen further unrest in Libya and Iraq over the weekend – whereby, the largest oil field in Libya has shut down production with armed forces cutting off exports from the region. Pipeline blockades in the east and west of the country have hindered oil production and forced output stoppages – more on that here – The conflict in Libya will be a focus for oil traders this week. While there has been some news of the US embassy in Libya getting involved, demanding that oil production resumes, this will only lead to heightened risks of escalations of conflict in the are has Haftar's forces are unlikely to bow down to US demands.
However, at this juncture, Libya's production is a drop in the ocean compared to global supply, producing only about 1.2 million barrels a day and growing supplies from shale producers in the US is a perceived supply risk for the bulls at this juncture. We are waiting for the EIA monthly report that will include an estimate for February shale oil production and markets are keeping a close ear out for global growth sentiment following the US/Sino trade deal agreement.
The 200-hour moving average has stalled the bullish advance in the US session today with the price completing a 50% mean reversion of the opening downside from 59.61 opening gap highs to 57.74 the recovery lows. The golden ratio of 61.8% sits at 58.87.