Fundamental Forecast for Crude Oil: Bearish
CRUDE OIL TALKING POINTS
Oil enters a bear market as the Organization of the Petroleum Exporting Countries (OPEC) shift gears to a ‘produce as much you can mode,’ and the current environment is likely to keep crude prices under pressure as the bearish momentum appears to be gathering pace.
Oil prices have tumbled more than 20% from the 2018-high ($76.88) as OPEC and its allies respond to the weakening outlook for global demand, and the group may continue to boost output throughout the remainder of 2018 even as U.S. crude production climbs to a record-high.
Fresh figures from the U.S. Department of Energy (DoE) show field production widening to 11.8K b/d from 11.2K b/d in the week ending October 26, but the updates continue to reflect waning demand for crude as inventories jump another 5783K in the week ending November 2.
The slowdown in emerging market economies paired with the trade war between the U.S. and China, the two largest consumers of oil, is likely to keep OPEC and its allies on track to foster lower energy prices especially as the Monthly Oil Market Report (MOMR) projects consumption in 2019. In turn, crude prices remain vulnerable ahead of the next OPEC meeting on December 6, and the recent pickup in volatility appears to be fueling a broader change in market behavior amid the ongoing shift in retail interest.
The IG Client Sentiment Report still shows retail sentiment near extremes as 82.6% of traders are net-long crude, with the ratio of traders long to short at 4.73 to 1.In fact, traders have been net-long since October 11 when oil traded near the $71.00 mark even though price has moved 17.1% lower since then.The number of traders net-long is 0.5% higher than yesterday and 26.6% higher from last week, while the number of traders net-short is 10.5% higher than yesterday and 6.4% higher from last week.
