Once again Crude Oil Prices showed further signs of weakness, despite all of the measures that have been taken by the Oil producers, whether OPEC or Non-OPEC members.
Every day we are receiving new statements by many of the producers saying that Crude Oil stabilization is the goal and that the commitment ratio for the output cut is more than 100%.
However, numbers are showing a different story; someone is actually cheating.
OPEC Production Set To Increase
Looks like a weird headline, isn’t it? But this is actually true, but some traders don’t follow the monthly data of OPEC.
The chart above is the latest data on OPEC member production, and as you can see, it has been rising for the past three months, reaching 33M Barrels, which is the highest level of oil production this year and the highest level since December of last year. It has been rising in May, June, and July.
Yesterday, there were some reports that the production is set to increase by another 100K barrels, which means that it will surpass the 33M mark.
The question is, how can OPEC say that the commitment is more than 100% and the production is rising? Later in the day, the commitment ratio has been revised down to 86%.
Now it makes sense, they revised it from 106% to 86%, but this is a huge difference. Yet, who is cheating? No one can know now. But what we know is that Oil will never rise as long as the deal is not implemented in full.
Moreover, OPEC has set a committee to monitor the commitment ratio. Yet, the production is still rising and they failed to monitor who is producing more.
As we said many times before, whatever happens, OPEC and Non-OPEC will not just watch Crude Oil crashing without taking additional measures.
Yet, until they reach that point, Crude has more room to decline. At the same time, as long as Crude Oil is unable to break above the $50 mark, the producers will remain very active through the media, to try to increase the hope for a possible deal in the future.
Oil Is Not Reacting To Anything
Oil failed to rise on many occasions, especially after the announcements from OPEC.
A few weeks ago, OPEC announced that it would cap some of the producer’s daily exports, including Saudi Arabia, which agreed to cap its oil exports to 6.6M barrels a day. Yet, Oil sustains its gains.
This week, the US Crude Oil Inventories declined by more than 6M barrels, while MoM declined by a record. Yet, Oil failed to rally.
If Oil is not reacting to OPEC, Non-OPEC and inventories data, don’t expect it to rally on remarks or statements to increase hopes.
WTI Crude Failed At $50 Twice
For the past two weeks, WTI Crude has been trading within a tight range, just below the $50 with no clear break above that resistance. Yesterday, it tried to break above that resistance, but failed to do so and broke down all the way to $48.10, declining below the 48.50 support area which held for two weeks. This would increase the possibility for another leg lower, possibly toward 47.0 for now if not 46.44.
Brent Crude May Test $50 Today
Brent Crude has the same story, but different levels, it has been trading within a tight range right below $53 for the past two weeks.
Yesterday, it tried to break out, but it failed at the end of the day, declining from 53.50 all the way back to 51.60’s until this report is released.
Yet, this is not a clear breakdown yet, $51 remains the support that traders should keep an eye on. A breakthrough that support would clear the way for further declines toward the $50 key support, where we will experience “make it or break it” moment.
A breakthrough the $50, would clear the way for further declines, probably toward 48.90’s if not more.
Don’t bet on a notable rally anytime soon.
By Nour Eldeen Al-Hammoury, Orbex
Nour Eldeen Al-Hammoury has more than ten years of experience in focusing on foreign exchange and global economic developments, as well as central bank policies and intermarket analysis (global markets relationships). Nour Eldeen is a regular on many major TV networks (several times each) such as: BBC Radio, BBC World News, Al-Jazeera, Al-Hurra TV CNBC Europe, CNBC Asia, CNBC Arabia, Al Arabiya, Bloomberg, Russia Today, Dubai TV, Sama Dubai, Skynews Arabia, Qatar TV and Future TV News.