The US Department of Energy has announced that oil production in the US fell by 20,000 barrels per day, which is equal to 0.2%, in the week ending April 10th. The price of oil has been quietly heading in the upward direction since the middle of March, when it commenced the formation of a double bottom on the weekly chart (see above for Light, Sweet Crude). The fact that price has cleared the previous high of mid-February confirms the completion of this Technical Analysis (TA) indicator.
Rally on production fall, geopolitical issues and demand
There have now been five straight weeks of price rises in the liquid gold. Apart from production cuts in the US, brought about by price pressure on the shale oil and gas producers, who have high costs, the international Energy Agency (IEA) has cut its supply forecast for non-OPEC countries. Production in Canada is also down, and even in the UK the recent Scottish referendum on possible independence brought into focus the slowing of the flow from there.
Then there are the geopolitical issues. Turmoil in Iraq and Syria have not had the impact we might have expected in the past, but maybe at last the market is taking notice. The worsening situation in Yemen is also starting to appear on the radar.
On the demand side, the IEA has increased its estimates of 2015 petroleum requirements by 90,000 barrels per day. This would mean an increase in consumption of 1.1% for the year.
So oil might be off the floor. That makes us think of other commodities. To paraphrase the poet Shelley:
“If oil price rise comes, can iron ore be far behind”?