Crude Oil Price Analysis for September 7, 2017

 

Crude oil prices moved higher on Wednesday testing resistance above 49 dollars per barrel, as potential shut in of production help buoy prices. With refiners coming back on line following Hurricane Harvey, demand for crude oil is picking up. Demand could face a setback if Hurricane Irma is as bad as expected. Libya largest oil field came back on line as prices moved higher, while better than expected ISM Services data also gave crude oil prices a boost.

Technicals

Crude oil prices rose higher on Friday, climbing by 0.88%, and poised to test target resistance which comes in the form of a downward sloping trend line that connects the highs in May to the highs in July and comes in near 49.50.  Target resistance on a break of the 50.10 level is the 52 handle. Support on crude oil prices is seen near the 10-day moving average at 47.50.  Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses above the 9-day moving average of the spread. The index moved from negative to positive territory confirming the buy signal. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices for crude oil. The relative strength index (RSI) which is a momentum oscillator that measures accelerating and decelerating momentum, moved higher with price action reflecting accelerating positive momentum. The current reading of 58, is in the middle of the neutral range.

Hurricane Irma Poised to Hit Florida

While the demand and supply equilibrium was offset with Hurricane Harvey hitting Houston, there is only one component that could be hurt in Florida.  Demand for gasoline will be hammered with more than 20-million people in the South Florida area.  Driving will be curtailed for about 5-days, but if there is real damage, demand destruction could be fierce.

Libya Restarts Larges Oil Field

Libya’s largest oil field, Sharara, will resume production following a two-week halt, after a pipeline blockade ended Tuesday. The pipeline that was blocked feeds crude oil from Sharara to the Zawiya export terminal. The armed group responsible for the latest blockade, which began on August 19, was one led by Ashraf Al-Gurj, the leader of an organization from Zintan that calls itself the Reyayna Patrol Brigade. The same group was behind the August shutdown of another two fields as well, El Feel and Hamada. The three shutdowns cost Libya 360,000 barrels per day in lost output, the National Oil Corporation said at the time.

Al-Gurj’s group claims they are fighting for more investments by NOC in Zintan but according to Libyan media, the more likely reason for the blockades is the release of Al-Gurj’s cousin, who is being held in custody on charges of smuggling.

U.S. ISM Services Were In Line with Expectations

The Institute for Supply Management reported that its non-manufacturing index increased 1.4 points to 55.3 in August, compared to expectations of 55.3, rebounding from an 11-month low in the prior month. The July increase in services industry activity also reflected a jump of 1.6 points. The employment sub-index jumped 2.6 points.  The business activity index increased 1.6% points in August from July, reflecting growth for a 97th consecutive month. The new orders index also registered higher at 57.1 in August, 2 points higher than the reading of 55.1 in July.

The U.S. Trade Deficit Rose

The U.S. Commerce department reported that the trade deficit rose 0.3% to $43.7 billion in July. When adjusted for inflation, the trade deficit widened to $61.6 billion from $60.8 billion in June. The real goods deficit in July was below the second-quarter average of $62.4 billion. Expectations were for a trade shortfall widening to $44.6 billion in July. Exports fell 0.3% to $194.4 billion in July. Exports of motor vehicles and parts fell by $0.6 billion, but exports of capital goods rose by $0.9 billion. Exports to China increased 3.5% while those to the European Union tumbled 9.8%. Imports of goods and services slipped 0.2% to $238.1 billion in July. Imports of motor vehicles and parts fell by $0.8 billion and crude oil shipments declined by $1.0 billion. Imports of goods from China increased 3.1%.