08 March, AtoZForex, London – At last Crude Oil $40 per barrel was reached on Monday for the first time since December amid discussions of oil production freeze by major producers and as US output finally shows signs of decline. But is it time to sell once more?
A meeting between major producers could be held in Russia, Doha or Vienna sometime between March 20 and April 1, Russian Energy Minister Alexander Novak said on state television. At the same time, US oil rig count fell by 8 to 392 last week, according to Baker Hughes Inc, the lowest level since December 2009. In turn sliding US production to the lowest level since November 2014 at 9.08 MMbbpd, according to Energy Information Administration data. Still, the nation’s crude stockpiles are the largest in over eight decades at 518 MMbbl.
“Market sentiment is turning positive because of this expected meeting to put a cap on production,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “US production is definitely going to decline throughout the year,” he added.
Also see: What is spurring the crude oil rally?
Crude Oil $40, scope higher
Brent for May settlement rose by $2.10, or 5.1%, to $41/bbl level after touching $38.94. The grade gained for a sixth day, the longest consecutive rally since November 25.
“Investors and traders have been eagerly awaiting their chance to ride the ever-impending oil market rally,” analysts at Barclays Plc including Miswin Mahesh in London said in a report. “Announcements of a second year of massive upstream capex cuts and talks of an output freeze among certain OPEC and non-OPEC countries seem to have provided support to sentiment.”
Although in today’s live Fibonacci market analysis Yagub Rahimov warned that the WTI will find itself a resistance at Fibonacci 161.8% retracement level at $37.97, he added that further scope remains for rally higher. In addition, according to CFTC data, investors had reduced their short positions in WTI crude by 15% in the week ended March 1.
News about oil freeze agreement
Azerbaijan would join producers in freezing production, ANS TV reports, citing Rovnaq Abdullayev, president of state-run Socar. Massive AZN devaluation is one of the consequences of cheap crude oil.
The current oil prices are forcing all producers to freeze output and there will be a price correction by year-end, United Arab Emirates Energy Minister Suhail Al Mazrouei told reporters in Abu Dhabi. Saudi Arabia, Russia, Qatar and Venezuela agreed last month that they would freeze oil output, if other producers followed suit, in an effort to tackle a global glut.
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