Oil under pressure on concerns of higher US production ahead of inventory data

Crude oil (WTI) is trading around 58.75, in New York session, having slumped by almost 0.90% and so far made a session low of 58.40 on concerns of incrementally higher US production which could delay the much-awaited rebalancing despite OPEC effort to cut production level.

Earlier, WTI edged up on a weaker USD and by comments from OPEC Secretary-General Barkindo, who said compliance among producers with crude output cuts in January will surpass the record level of 129% from December.

The IEA (International Energy Agency) has projected yesterday that higher crude output outside OPEC & Russia primarily to be driven by US shale oil production could surpass the global demand by 2018. In its closely watched monthly oil market report, the IEA called the situation as "reminiscent of the first wave of U.S. shale growth" that precipitated the oil-market selloff and price crash in late 2014.

Although, The IEA have upgraded their forecast for global oil demand growth to 1.4 mbpd in 2018 from 1.3 mbpd, however, they said that Non-OPEC supply, led by the US,  is likely to grow more than demand in 2018.

The US EIA (Energy Information Administration) is also expecting US shale production to increase to 6.76 mbpd by March’18, 1.3 mbpd more than a year ago (March’17).

Iraq oil minister also stated that there is no current discussion over exiting supply cut agreement. Russian Energy Minister Novak stated that OPEC and Non-OPEC allies need to act very cautiously and avoid knee-jerk reactions in respect of new decisions.

All eyes may be now on US EIA inventory report, tomorrow.

Technical View:

Price action suggests that WTI now needs to stay above 58.00, otherwise, 55.65-53.30 may be visible soon. For any meaningful strength, it needs to further sustain above 60.15-60.85 area for 61.40-62.80 & 63.05-63.55 area in the coming days.