The International Energy Agency (IEA) has just released its most recent Oil Market Report, in which the organisation projects further increases into the overall oil input into 2020.
The IEA has made a compelling argument, claiming that the oil market is showing resilience against the growing geopolitical threats worldwide, and continues to remain relatively calm despite them.
In the report, it is further argued that:
“The calmness is supported by a well-supplied market and high inventories. This may continue into 2020 because non-OPEC countries will grow their production by 2.3 mb/d. The US will lead the way but there will also be significant growth from Brazil, Norway and barrels from a new producer, Guyana.”
These expectations for a presumable surge in overall production output by the end of Q1 2020 in addition to the projections for a “sharp rebound” in global refinery activity, is likely to weigh in on the long-term price setting of the commodity.
The price of the crude oil is currently trading in a tight consolidation range at around 56.48 dollars per barrel, which is close to but below the major resistance level at 57.22, which is also the 38.2 per cent Fibonacci retracement level.
If the estimations of the IEA are correct, then the price of the WTI is unlikely to break out above the resistance level anytime soon.
Instead, it is more likely for the USOIL to form a new bearish downtrend, originating from the 56.22 price level and boosted by the expectations for heightened production output.
In that case, the price is likely to test the strength of the next major support level at 51.52, which is the 61.8 per cent Fibonacci retracement level.
USOIL 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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