As the US brutal storm, market expects Saudi Arabia will increase production. Oil prices will be fluctuated (with trading strategy)

Boosted by an unprecedented cold wave, the prices of US WTI crude oil and Brent crude oil both hit a 13-month high on the previous trading day. According to reports, as many as one-third of the crude oil production capacity in the United States has ceased production, but with in-depth analysis of the impact of the cold wave, the focus of investors has shifted from producers to refiners.

ANZ Bank said: “The market is worried about the capacity of the refinery in Texas. The extreme cold weather will cause the power supply to be interrupted and the oil wells and tubing will freeze.” Although the United States has already suspended 3.5 million barrels of crude oil production per day, the reduction in refinery demand may still lead to the next few years. Weekly crude oil inventories increased.

At the same time, Citigroup also pointed out that some US refiners may carry out spring equipment maintenance work ahead of the peak of summer self-driving tours. "This will cause refiners to stop production longer and on a larger scale."

The unprecedented cold current has frozen oil well operations and caused extensive power outages. The United States currently has more than 4 million barrels of crude oil production (about 40% of crude oil production) suspended. However, a large number of oil refinery shutdowns have curbed U.S. demand for crude oil, while gasoline consumption is also declining, because many Americans stop going out because of ice and snow.

Supply shocks are helping the already frothy global oil market and beginning to change energy flows. Traders have snapped up ocean-going tankers and shipped millions of barrels of European diesel to the United States. The American Petroleum Institute reported that U.S. crude oil inventories have fallen by nearly 6 million barrels, further boosting the upward momentum of crude oil inventories.

On Wednesday, Dow Jones reported that Saudi Arabia is planning to increase production in the coming months. Analysts expect that in view of the recent surge in oil prices, Saudi Arabia will increase oil production from April.

The auto industry was forced to shut down

The blizzard interrupted the supply of natural gas in the southern United States and Mexico, and caused severe damage to auto factories along the US-Mexico border. Ford, General Motors, Toyota and other automakers have announced the closure of many plants.

The blizzard overwhelmed the Texas power grid, and the natural gas supply originally provided by Texas to Mexico was blocked as a result. This week, millions of people in the industrial towns of northern Mexico had no electricity. The cold wave in Texas is expected to continue until Saturday and it will gradually warm up.

It is expected that the crude oil market will continue to be affected by changes in the freezing weather in the United States and the ups and downs of the US fiscal stimulus hopes.

Trading strategy (Source: Trading Central)

Pivot: 59.20

Our preference: long positions above 59.20 with targets at 60.25 & 60.70 in extension.

Alternative scenario: below 59.20 look for further downside with 58.60 & 58.00 as targets.

Comment: even though a continuation of the consolidation cannot be ruled out, its extent should be limited.

Supports and resistances:

61.20

60.70

60.25

59.82 Last

59.20

58.60

58.00

Guideline for Trading Central strategy

Trend chart reading guideline

1. First look at the time period in the upper left corner of the chart：

・30MIN and 1H chart shows the trading suggestions for intraday

・Daily chart shows the market trend analysis in next 2-3 days

2. The blue horizontal line on the chart marks the pivot: pivot indicates the reversal of the market. When the price is above the pivot, it indicates an upward trend, when the price is below the pivot , it indicates a downward trend. When the price breaks through the pivot, the trend is reversed.

3. The red and blue thin curves in the Candlestick chart chart are technical indicators: Red line is  MA20+Bollinger bands, Blue line is MA50. under the Candlestick chart chart are also the technical indicators:  Blue line is RSI, Red line is 9MA;

4. The green horizontal line is the resistance level for a price increase, and is also the profit target for long orders; the red horizontal line is the support level for a price decrease, and is also the profit target for short orders.

How to use TC strategy？

1.[Pivot] is the reversal line of the market trend. When the price up the pivot line which means in Bullish, you can open a long position or Buy. on the contrary, when the price under pivot line which means in bearish. You ‘d better make short positions or Sell.

2. [our preference] is the main trading suggestion for your reference. You can exit your trading refer to this target or close positions before it.

3. [Alternative scenario] is the plan B for your reference.

4. [Comment] is the technical analysis of market trends and technical support for trading strategies.

5. [Supports and resistance] Supports are levels where the price tend to find support as it falls.

Resistances are levels where the price tend to find resistance as it rises. So, exit before the trend reverse.