Will oil move above the previous peak?

December 21, 2016

Oil prices are moving higher today and we are already at the previous peak before Libya announced its plans to add around 270 thousand barrels per day to the pace at which it extracts the commodity in 1Q.

Libya was allowed by OPEC to have free hand - but this was quickly noticed by the market as one of the main risk factors for the deal that was reached by the cartel at the end of November.

Where does the current upside momentum on oil come from? API report covering last week’s US crude and distillates inventories sent the bullish signal and the market is preparing to see a confirmation of it in the official Department of Energy numbers due this afternoon. 

More good news is needed to make oil prices push above the last peak; source: xStation5

We are also getting some comments from the Russian energy minister Alexei Novak:

he sees stabilization of oil prices in the short-term even though in his view the effect from the OPEC+ non-OPEC deal on curbing output is already in place and there should be no doubt about countries fulfilling the self-imposed obligation to freeze/cut output
the oil market oversupply may diminish in 2H of 2017

The last point does not sound like the deal among producers meant a sea-change for the market perspectives and may actually weigh on crude prices.

Novak also shared his assessment of how the US shale oil output may react in 2017 to higher prices (+300-400kb/d).

A short-term bullish trend is still there, we notice a support at 51.80 USD/b; Source: xStation5

 OIL is up by around 0.5-0.7% today for both Brent and the WTI. A short-term trend remains clearly bullish with the 51.80 level serving as a support. However, bulls might find a resistance between 54-55$/b for the WTI.

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