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”?
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