Crude Oil Prices Edge Higher, Supply Concerns Limit Gains

Oil prices have edged higher with some further relief that important support levels held, although underlying over-supply concerns have continued to limit scope for gains.

After sliding ahead of the US open on Thursday, crude prices gained some relief later in the session with WTI finding support on approach to $47.50 p/b. Prices also edged stronger in Asia on Friday, although there was selling interest near $48.20.

Oil prices were reported to have gained some support from a reduction in Saudi Arabian exports to the US, although any positive impact on prices is likely to be offset by expectations of rising US production which lessens the need for imported oil.

Overall, there were further doubts whether global oil inventories would decline significantly during the second quarter. If inventories remained near record levels, markets would expect that OPEC would need to extend output cuts in order to prevent further downward pressure on prices.

WTI consolidated just below $48.00 p/b ahead of the US open with Brent around $50.75.

Trends in the dollar and risk appetite will be important during the New York session, although the main impact is liable to be for choppy trading conditions rather than a clear impact on direction.

The latest crude positioning data will be an important focus once the data is released late in the US session. The most recent data recorded a notable decline in net long positions, primarily due to a big increase in short interest. The latest data will be watched closely and a very sharp further reduction in net long positions would lessen the risk of another round of aggressive long liquidation.

WTI Oil Price 4-Hour Chart

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Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.