Oil ended the week pretty much where it began. A combination of bullish and bearish news in the market drove sideways trading. A press story that the U.S. requested OPEC increase oil output by 1 million barrels per day (mb/d) in the second half of 2018 and rising U.S. oil output put downward pressure on prices. Conversely, prices were supported by collapsing production from Venezuela and anticipated resistance from other OPEC members to increase production at the June 22 meeting in Vienna, Austria.
This week will be a busy one for oil traders and investors who are anticipating reports from OPEC, the IEA and the EIA, as well as the annual statistical review of the oil market by BP p.l.c. (BP).
On Tuesday, OPEC will release its monthly oil market report for June. Traders and investors will be keeping an eye on revisions to supply and demand forecasts. The cartel forecasts non-OPEC supply in 2018 to increase by 1.72 mb/d compared with growth of 0.87 mb/d in 2017. OPEC revised up non-OPEC supply expectations for 2018 by a marginal 8,000 barrels per day compared with last month's assessment to average 59.62 mb/d for the year. OPEC now expects non-OPEC supply to grow at a slightly faster pace, as can be seen in this chart.
On the demand side, OPEC says it currently expects OECD Americas oil demand growth of 0.27 mb/d in 2018, compared with 0.14 mb/d in 2017. China is another area of focus. Chinese oil demand growth was 0.52 mb/d in 2017, up 4.4%. In 2018, OPEC expects Chinese oil demand to grow by 0.42 mb/d, up 3.4%. Traders will be closely watching revisions to these numbers for clues about future OPEC production targets.
Also on Tuesday, the U.S. EIA will publish its short-term energy outlook for June. In the May report, the EIA projected that U.S. crude oil production would average 10.7 mb/d and 11.9 mb/d in 2018 and 2019, respectively, up from 9.4 mb/d in 2017. The EIA also increased the 2019 supply forecast in the May report by 0.4 mb/d compared with the April report. Traders will be watching carefully to see if the EIA revises up these figures again. The EIA currently forecasts U.S. crude oil production to end 2019 at more than 12 mb/d, making the country the world's leading oil producer.
Wednesday will also be a busy day for traders and investors in the oil patch. The IEA will publish its June oil market report, and BP will release its much-anticipated annual statistical review of world energy.
Much like the OPEC report, traders will be looking to the IEA for guidance about the direction of supply and demand in the global oil market. Last month, the IEA revised down global oil demand growth forecasts for 2018 from 1.5 mb/d to 1.4 mb/d, mostly attributable to higher oil prices. The IEA currently expects non-OPEC output to grow by 1.87 mb/d in 2018. Traders will be keen to see if the IEA reverses its widening gap between slowing demand and rising supplies in this month's report or if it will get worse.
BP is set to release the 67th edition of its annual Statistical Review of World Energy to round out the weekly data deluge. Energy analysts around the world await this annual publication that dates to the 1950s. BP says that the publication provides high-quality objective and globally consistent data on world energy markets. Most analysts use it because of its long time-series of updated data.
BP will host a webcast to present the report that will address topics such as energy market, oil, natural gas and coal developments, as well as carbon emissions, renewables, hydro and nuclear energy. Energy analysts generally rely on this data to build long-term energy market models and supply/demand forecasts rather than generate trade signals.
Oil prices took a rest from their recent downtrend this week and closed Friday mostly unchanged from Monday. Prices found support around $65.50 per barrel, which was a previous upward resistance level in late January and late March 2018. Technically, however, prices remain weak. On the daily price chart, 10 technical indicators are giving sell signals, while 7 out of 12 short- and long-term simple and exponential moving averages also suggest selling.
This week will be an important one for price signals. Because of last week's pause, oil is currently entering a bullish doji star pattern on the weekly price chart. A doji star pattern generally shows the potential for a rally, as many traders may have changed positions. For this trend reversal to be confirmed, prices need to close above the doji with the next weekly candle.
Disclaimer: Gary Ashton is an oil and gas financial consultant who writes for Investopedia. The observations he makes are his own and are not intended as investment or trading advice. Price chart courtesy StockCharts.com.