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OIL: back to the rising curve?

OIL: back to the rising curve?

Information is not investment advice

What

Reports say, the Libyan general Khalifa Haftar’s army blocked the country ports and froze the major oil production facilities. As a result, the total Libyan oil exports dropped by more than 50%.

Numerical context

The global oil output is estimated at 80 million barrels per day. Libya, an OPEC member, has approximately 1 million, which is less than 1%. 

Political context

Since the takedown of the Libyan infamous leader Muammar Al Qaddafi, the country has been in continuous turmoil. The world powers, especially those of regional influence, are involved in the conflict through direct and indirect assistance to the warring sides. Until now, the EU and Turkey have been mostly behind Prime Minister Fayez Al Sarraj sitting in the country capital of Tripoli, and Russia supporting Khalifa Halftar.

What’s the status

Recently, the peace talks in Berlin have taken place. Although the two Libyan leaders refused to talk directly to each other, the foreign country leaders expressed modest satisfaction with the results of the peace talks.

What’s in that for me

For you, there is an upsurge of the oil price, which you can use if you are trade this commodity. After the US-Iran conflict lost its momentum, there was nothing to boost the price. However, the Libyan problem raised the risks of oil undersupply and pushed it back up. WTI_OilH4.png

Now, WTI is traded at $59, right below the resistance of the 200-period MA and testing the 50-period MA. In the mid-term, the fact that the Libyan leaders failed to reach a peace concept themselves and only foreign powers forced them to cease fire, means that this agreement is likely to be as temporary as futile. Hence, the Libyan factor will continue being an underlying potential for the oil price growth. Therefore, you may keep it in your trade radar using information inputs to benefit from the oil price performance. 

So what’s the tactic

Watch the news and how the conflict goes. As you can see, plus-minus 1% in the global oil output destabilizes the price. Use it accordingly to set your trade positions.

For example, as the conflict in Libya has received a dose of pacification from the foreign powers, we may conclude that the oil price will stay around its current level to look for the status confirmation in the short-term. But later, if the Libyan exports unfreeze and restore the normal levels of supply, the price is likely to get back down to the previous levels of $58.20 per barrel. Hence, it makes sense to buy now and look for selling at the mentioned level. If there is relative silence from Libya in the coming days, it means that the temporary ceasefire did have its effect, and the oil price will react to it accordingly. Otherwise, be ready to quickly close the position if the conflict escalates further after the Libyan leaders get back to their positions at home and re-group. In that scenario, $60 per barrel for the WTI oil will be a likely threshold to aim at.

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