OPEC’s Compliance at 100%

Fundamental Analysis:

The recent developments in the Oil market have been rather enticing for Investors capturing the main focus of the market in the past days. OPEC’s meeting took place last week and it confirmed the market’s expectation of increasing supply. The result of the meeting was that crude oil supply should increase by as much as 1 million barrels per day. It must be noted that, OPEC and its allies have been very focused and disciplined with their agreement to cut supply previously. This discipline could also be translated as a very aggressive approach towards output and they may have left global demand somewhat uncovered for the time being.

Furthermore, a case could be made that only a few OPEC members have the capacity to produce Oil at higher levels or even the full volume of their targets levels. Of course, at the head of the list is Saudi Arabia and their fellow team mate Russia follow, but the question remains if these 2 countries can cover the demand in place which is seen increasing. Exports of Saudi Arabia have increased in the latest months and the decision to increase supply even further, could be an indication of misjudgment of oil demand.

On the other hand, as per OPEC and its ally’s agreement, it is not clear if a member is allowed to step in and cover for other countries shortfalls. More specifically, Venezuela and Libya which have significantly reduced their Oil production and exports due to political circumstances on the inside, cannot be covered by a member state because of OPEC’s legally binding agreement to cut supply. It is our opinion that the Saudi Kingdom could be under a lot of pressure from the US, in the following months, in order to increase exports and supply levels. However, from what the Saudis have revealed until now, they remain pretty cool and confident as they have never lost control and have been in line with their goals and targets in price and output. Yet, relying completely on the kingdom could be of significant risk, as until now they have been more on the side of keeping output stabilized in order to push prices higher.

The most recent news, coming from the international scene is that the US has pledged OPEC to increase Oil production with president of the US, Donald Trump opening up on his desire for Oil prices to remain low. OPEC announcement on Friday confirming that Oil Supply output will be increased had an adverse effect which found Oil prices rallying. The reason behind this market reaction could be that OPEC indicated a smaller than expected increase of production. OPEC’s compliance with the cutting agreement was over +100% and will now drop equal to that level and not below or above it. Moreover, Iran officials, have demanded that OPEC dismisses calls from the US for an increase in oil supply, arguing that the US was the reason of the recent rise in prices by imposing sanctions on Iran and fellow member Venezuela.

On a separate note, US Oil rigs were reduced from the previous week according to Baker Hughes. For the first time in 3 months, US oil rigs are seen reduced by -1 in comparison to last count. The Oil rigs counts is a measure of future demand and could have also impacted Oil prices, strengthening them but to somewhat minor degree compared to the pre mentioned news.

It will be very interesting to see how OPEC and its team mates will handle all the pre-mentioned issues. OPEC has most certainly shown its dominance in the Oil global market as even the US is reaching out publicly asking for more supply. OPEC has good reasons to be in good terms with the US. However, it is most probable they will not be able to please everyone and be on top as a group themselves but in our opinion they will not make significant changes any time soon.

Technical Analysis:

We start this analysis by noting that our previous 3 resistance levels $64.95,  $66.13, $67.60 have all been broken in the previous sessions and our now our support levels.

The commodity could be overtaken by a bullish movement causing it to move up towards the $69.55 resistance level and break it, moving further near the $70.50 resistance barrier.

Further statements on OPEC planned output increase could create turbulence for the black gold market.
If Crude Oil enters a bear market, we could see it moving downwards towards the $67.60 Support level and even breach it aiming for the $66.10 Support hurdle.

For the time being Crude Oil could be moving in a sideways movement between $69.55 resistance level and the $67.60 support level.

The oil market is familiar to uncertainty

Fundamental Analysis:

The recent updates coming from the US front regarding trade tariffs with China is the most recent market mover and has affected the market as a whole. At the time of the news release, on Friday the 15th of June, when the mounting tariffs were announced, a huge market sell off was displayed with most of the focus on the US markets but also commodities. Crude Oil alone lost -3 dollars approximately going from $66 to $63 p/b.

The US decision to move ahead with the tariffs will hurt the oil market in general but more specifically American oil exports to China. On the other hand, China may use further retaliation measures by selecting to import oil from other sources even on slightly higher prices. On a more vengeful scenario, China may choose to import Oil from other sources on a more immediate note and on a more vengeful action.

On the OPEC front, Saudi Arabia and Russia have confirmed that on the upcoming meeting planned for the 22nd of June they will be talking on increasing supplies. In combination with the pre mentioned fallout of business agreement between China and the US, they could be the best choice for China. In addition it was confirmed by Russian officials that they are moving closer to sign a mutual agreement which will take their cooperation in the Oil market to a new level.

Furthermore, Iran has been cited as trying to prevent this oil supply from taking place.  Iran says Venezuela and Iraq are in agreement to block Saudi Arabia and Russia’s proposal when OPEC and its allies meet in Vienna this week. Iranian officials stated that in order for OPEC to continue with Oil supply additions, it must be agreed on unanimously by all the members. If they decide to proceed without consensus in place, they could be in violation of OPEC laws.

On other news, tensions in Libya have resulted in a reduction of storage capacity by 400,000 barrels. It has been reported that a crude oil tanker was set on fire after tensions among rival groups for control of two key export terminals. The danger of the fire spreading to nearby oil tankers remains high and has the potential of hurting oil supply coming from the African country. However, this newsflash could provide support for oil prices as the commodities price has been pushed down in late May moving into June.

Venezuelan crude oil exports have dropped to significantly low levels according to EIKON Reuters. Problems with reduced output and mounting logistic issues mounting from a corrupt government have restrained the Latin American country’s oil activities. One of Venezuela’s most established crude oil buyers has been China. Estimates, indicate that China’s imports of Venezuelan crude oil could shrink to their lowest in nearly eight years in July as the OPEC producer struggles.

The most important event for the Oil market is the upcoming OPEC meeting on the 22nd of June on Friday. This event will give a clear view on the intentions of the organization’s future steps and what changes have taken place in order for OPEC to change its current strategy and start boosting supply instead.

Technical Analysis:

Our first observation, is the strong support level near $65 which has been breached and now turned to resistance level. That acted as a resistance level in January and again in March. Oil has a well-established pattern of moving in trading bands. We see the case for the commodity to remain very close to that price action for the next days with some bullish tendencies.

However, please be advised Crude Oil could show its sensitivity on the US – Sino tariffs confirmed on Friday.

If the upcoming OPEC meeting acknowledges that further output will be produced we could see crude oil moving downwards towards the $63.50 Support level and even breach it aiming for the $62.00 Support hurdle.

The commodity could also be overtaken by a bullish movement causing it to move up towards the $64.95 resistance level and break it, moving further near the $66.13 resistance barrier.

Further news regarding the Venezuela’s decreased production could also provide support to Oil prices as the matter is somewhat unfinished and uncertain as per the outcome.

Crypto market in pursuit of security and reliability

Fundamental Analysis:

Bitcoin along with other crypto-currencies is going through a very strained period as it seems. As the time progresses more and more issues are looking to bring out the negative side of the digital market instead of embracing it.

The latest negative news, are coming from the Asian continent and more directly the South Korean crypto exchange Coinrail was undergone a cyberattack during the past weekend. In a more simple tone, a digital robbery was confirmed by Coinrail as well as an amount around $30 million worth of lesser-known cryptocurrencies. This negative event, digs deeper in investors’ fears dealing with the digital market reliability and it repels the smooth operation these exchanges boast about, leaving them vulnerable to further harmful publicity. Even though insurance could come into play and should be enacted as this is not the first time cyber-attacks have taken place, the issue still remains unresolved and more work has to be put in the industry to protect investors and companies .

The abovementioned event, hurt Bitcoins price which followed with a steep drop dragging along its path other crypto’s like Ripple, Ethereum, and Litecoin. The drop acted like a blow to the head for investors which chose to cut their crypto holding, erasing almost $50 billion from the market since Friday.

In the US, Government investigators requested complete trading data from various bitcoin exchanges in order to form a complete investigation regarding crypto price manipulation. Bitcoin futures were made available for trading on CME Group Inc, some 6 months ago and this investigation was put in place in order to check if the prices of those instruments represent a fair and true value. CME Group Inc offered these crypto futures from prices received from four bitcoin exchanges Bitstamp, Coinbase, itBit and Kraken. Some of the pre mentioned exchanges refused to give the data requested, however later followed up and made the data available when limits to the request were set and smaller volume of data was asked for. CME’s regulator, the Commodity Futures Trading Commission was not satisfied as no agreement is in place to be able to retrieve this kind of data from price providers, when needed.

On another front, Apple Inc. has legally prohibited users of iPhones and iPads from mining digital currency on their devices. The company publicly noted that cryptocurrencies processing could be performed by cloud-based mining but not applications devices. Apple Inc assists Google’s decision made in April 2018, which very similarly does not allow in-browser mining of cryptos as these activities are contrary to their terms and conditions.

In addition, chairman and CEO of JPMorgan Chase Jamie Dimon while on a live interview on CNBC along with Warren Buffet, made it clear for bitcoin followers or investors to be aware.

It is our opinion that a solution can be found. However, market participants should be on the lookout as the industry’s inexperience could be exploited further and even bigger amounts than 30 M could be stolen.  Eventually governments and regulations could make the necessary changes to confirm security and reliability to market participants by identifying users or by finding a way to trace digital assets.

 

Technical Analysis:

Bitcoin fell 1.05% to $6,700 but remained just above lows seen over the weekend of 6,633.9.

It is current trading between our noted $6,700 resistance level and the $6,100 support level.

A break above $6,700 resistance level, however, will not only lead to an advancement to $7,120 resistance level but also signal a reversal of the downtrend from the May 5 high of $9,948.98.

If the bears dominate the market Bitcoin could have downward movement break below $6,100 Support level and could aim for the $5,700 Support barrier.