Crude Falls Sharply As Market Worries About Supply & Demand

Oil prices fell sharply on Friday as the market became concerned again about supply and demand fundamentals. There is scepticism that OPEC will improve quota compliance, continued uncertainty over demand from China and growing expectations of a prolonged hold from the Fed. The USD index was unchanged on Friday.

• WTI trended lower through Friday and fell 2.6% to $76.57/bbl to be down 2.4% on the week but still up 1.1% in February to date. The benchmark remained above initial support at $75.25 with a break of $71.49 reinstating the recent bearish theme. Key short-term resistance is at $78.52, February 16 high.
• Brent fell below $82 to be down 2.5% at $81.58/bbl and is now up only 1.3% this month. It is still well above initial support of $79.88, 50-day EMA. Friday’s sell off reinforces the bearish threat but the trigger for the resumption of a downtrend is at $76.62, February 5 low.
• The diversion of vessels around southern Africa is exacerbating a shortage of tankers. There are only two new supertankers due to sail this year, which is the lowest in almost 40 years.
• The US and UK hit 18 Houthi sites in Yemen on Saturday to reduce their capabilities to attack shipping in the Red Sea. Previously recent geopolitical developments weighted on oil with no increase in energy sanctions on Russia and Israeli negotiators going to Paris for ceasefire talks.