After the fall in oil prices to $42 last week, oil prices suddenly went up and reached $45 a barrel CL/WTI. Oil has strengthened thanks to a decreasing volume of oil extraction in the USA by 100,000 barrels per day.
However, despite the slight recovery in oil prices there are no prerequisites for the further growth of prices. The oil market is still oversupplied. The increased volume of oil extraction in Libya and Nigeria restored oil exports to the level from before OPEC reached an agreement on the reduction of oil production. Still, these two countries are not the only reason for the decreasing of the oil's value.
The United States and Canada neutralize all of OPEC's attempts to stabilize the situation on the market. The Canadian Association of Petroleum Producers predicts an increase in oil extraction by 270,000 barrels/per day for this year and 320,000 barrels/per day in 2018, due to the launch of new oil fields which were developed when oil was still at $100 per barrel. In order to recoup the project investment, manufacturers are forced to increase oil production despite the low prices. Oil production in the United States also tends to be increasing. The recently decreased volume of oil production is likely to be temporary, in connection with the storm in the Gulf of Mexico.
Thus, we can assume that in the medium-term perspective oil prices will continue to decrease and the downward trend will continue as long as the market remains oversupplied. Therefore, the deals to sell for now can be considered as the most effective. The MACD and RSI oscillators confirm this is a good moment to open the short deals on the trend.
