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Crude oil futures climb Rs 52 per barrel on overseas cues

Crude oil futures climb Rs 52 per barrel on overseas cues

The higher price floor has encouraged the view that we see an Elliott-Wave pattern known as a triangle, which is a mid-trend correction pattern.

What's more impressive than the technicals is the environment oil is rally in.

That's when the Saudis tried to put American shale oil out of business. And that's exactly what they did.

Oil prices ought to have recorded bigger gains in the wake of OPEC surprising success in following through on the production cut deal. The gross-short position in the futures market from these participants continue to make fresh record highs with producers typically hedging forward prices one to two years out. The Saudis would take a short-term hit to their profits, but they'd win back market share from the American producers.

Investment in the Mena hydrocarbons industries hit an eight-year low in 2016 dropped 34 per cent to $32.4 billion, according to data from regional projects tracker Meed Projects.

It's not just the US however: in addition to USA shale, BofA sees incremental growth in Brazil, Russia, Kazakhstan and Canada over the next five years, driven by giant projects in the Lula, Kashagan or Johan Sverdrup fields.

On November 30, 2016, OPEC countries agreed on reducing oil production by 1.2 million barrels per day, with a daily cartel-wide cap standing at 32.5 million barrels.

That put a major damper on even the best oil stocks.

This may be true, unless of course just like USA shale, production breakeven costs are sliding across the world.

Oil prices started the week in recovery mode following losses Friday sparked by signs of increased exploration and production activity in North America.

OPEC has so far recorded about 90 percent compliance with among member nations on its plan to reduce output. Its demand for oil products rose 0.046 million bpd to 2.21 million bpd.

Traditionally, rising long positions indicate robust demand and higher prices, however, this has not been the case with this market. But before we get there, we still see the oil market facing enough challenges to make an upside break hard to achieve at this stage. So about 1/3 of global oil supply growth will come from OPEC in 2017-22 (Chart 5).

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