Brent crude reversal hopes helped by decline in OPEC production
The OPEC monthly report has highlighted the extent of the output decline seen in response to the attacks on Saudi operations in September. Could this help build a bottom for Brent following recent declines?
Crude prices rallying after OPEC report
Crude prices are on the rise today, as the Organisation of the Petroleum Exporting Countries (OPEC) monthly report shed light on exactly how much the recent Saudi Arabian attacks have impacted output over the past month.
The group did see a drop-in output, falling by 1.3 million barrels per day (mbpd) which represents around 4-5% of the total output compared with the August number. For the most part that decline was a representation of the decline in Saudi production, with their output declining by a substantial 1.28 mbpd for the month. This represents a 13% drop for the month of September. Certainly, it could have been worse, with the attacks reported to have knocked out half of the Saudi production capacity. These figures do highlight how quickly the likes of Aramco managed to get operations back online.
However, it is notable that we did not see any other OPEC members pick up the slack, with global supply likely to have declined as a result.
OPEC crude oil production
According to secondary sources, total OPEC-14 preliminary crude oil production averaged 28.49 mb/d in September, lower by 1,318 tb/d m-o-m. Crude oil output decreased mostly in Saudi Arabia, Venezuela, Iraq and IR Iran, while it increased mainly in Libya, Angola and Congo.1
| 2017 | 2018 | Quarter one (Q1) 2019 | Q2 2019 | Q3 219 | July 2019 | August 2019 | September 2019 | September/August | |
| Algeria | 1,047 | 1,042 | 1,026 | 1,019 | 1,021 | 1,027 | 1,017 | 1,018 | 1 |
| Angola | 1,634 | 1,505 | 1,443 | 1,420 | 1,394 | 1,385 | 1,387 | 1,411 | 24 |
| Congo | 252 | 317 | 326 | 332 | 326 | 323 | 321 | 335 | 14 |
| Ecuador | 530 | 519 | 526 | 529 | 541 | 535 | 541 | 547 | 6 |
| Equatorial Guinea | 133 | 125 | 115 | 114 | 121 | 121 | 120 | 124 | 4 |
| Gabon | 200 | 187 | 209 | 212 | 205 | 208 | 209 | 199 | -10 |
| Iran, I.R. | 3813 | 3553 | 2725 | 2407 | 2191 | 2218 | 2193 | 2159 | -34 |
| Iraq | 4446 | 4550 | 4635 | 4705 | 4749 | 4736 | 4785 | 4724 | -60 |
| Kuwait | 2708 | 2745 | 2715 | 2693 | 2659 | 2667 | 2651 | 2660 | 9 |
| Libya | 811 | 951 | 965 | 1154 | 1099 | 1076 | 1060 | 1164 | 104 |
| Nigeria | 1658 | 1718 | 1736 | 1786 | 1846 | 1805 | 1875 | 1859 | -16 |
| Saudi Arabia | 9954 | 10,311 | 10,019 | 9769 | 9769 | 9687 | 9844 | 8564 | -1280 |
| United Arab Emirates (UAE) | 2916 | 2986 | 3066 | 3063 | 3079 | 3074 | 3081 | 3082 | 1 |
| Venezuela | 1911 | 1354 | 975 | 776 | 710 | 755 | 727 | 644 | -82 |
| Total OPEC | 32,014 | 31,864 | 30,481 | 29,978 | 29,314 | 29,616 | 29,809 | 28,491 | -1318 |
Crude oil price technical analysis
Crude prices have been on the rise following this decline in September output, with Brent crude regaining ground following overnight losses.
The weekly time frame best highlights the importance of current price action, with the past five months of downside providing us with a fall into both trendline and 76.4% Fibonacci support. That confluence of support adds gravity to the possibility of a bottoming out from here, with a decline below $55.80 needed to begin bringing the bears back into prominence. Until then, there is a good chance we are building a base before we push higher once again.
The intraday picture highlights the gradual base that seems to be building, with the hourly chart showing the current push towards the $59.18 resistance level following a higher low established this morning. With that in mind, watch for a break through $59.18 and $59.51 to provide bullish confirmation, with a phase of upside looking likely should such a break occur.
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