Oil Prices Edge Up On Reduced Crude Output

On Friday, oil prices edged higher on optimism that global oil output is being reduced. This has a lot to do with the fact that the oil stockpiles reported in the U.S. this week were lower than expected. What also helped oil prices higher was a more dovish Fed.

What could move oil prices higher is a larger commitment for the OPEC deal. WTI crude oil edged higher by 0.23% to 48.86 a barrel, while Brent crude oil was higher by 0.14% to $51.81 a barrel.

Lower Stockpiles

The Energy Information Administration — EIA — released the weekly U.S. stockpiles data on Wednesday. It reported that there was a drawdown of 237,000 barrels in the week ending March 10. This reported number was good for a few reasons. The first reason is that the reported number was better than expectations.

Analysts were expecting a build of 3.7 million barrels. The second reason is that there was a drawdown in stockpiles instead of build. Being that oil prices are reliant on stockpiles, a drawdown helps the price trade higher.

The final reason why it was a good number is because it was an improvement from prior weeks. Oil stockpiles had been building for nine weeks in a row prior to this report. Traders must have been happy to see that there was a drawdown after so many weeks of a build.

Fed Change

The Fed hiked interest rates again this week. The last time it hiked rates was back in December. The Fed raised rates to between 0.75% to 1%. With the Fed raising interest rates, it should have caused the dollar to trade higher, but in this case it didn’t. The dollar index traded lower by 0.1% to 100.40.

That reason would be because the Fed was dovish on rates. Instead of the Fed aligning itself with more rate hike commitments, it kept its schedule the same. Traders were looking for the Fed to increase the amount of rate hikes this year, and not keep it the same.

With the dollar trading lower, it allowed oil prices to edge higher on Friday. The reason for this is because oil prices have a correlation with respect to the dollar. When the dollar traders lower, oil prices trade higher and vice versa.

OPEC Deal Enhanced

OPEC and non-OPEC members reached a significant deal last year to curb oil output. That is where these countries agreed to cut output by 1.8 million barrels per day in the first half of 2017. Things seemed to be starting off well for oil.

The problem is that the amount of cuts being implemented were not enough to counter the global oil glut in place. OPEC’s monthly stockpiles report noted the amount of barrels for the month. It was revealed that global oil output for the month of January came in at 278 million barrels.

That is a lot of barrels to begin with. In addition, that is higher than the five year average for total barrel output. With this in mind, the Saudi Minister has made it clear that the OPEC deal might have to be extended. This news more than likely helped oil prices edge higher.

What Binary Options Traders Should Watch For

Traders should watch a few things.

The first of which would be to track how much stockpiles are being produced. The amount of stockpiles being produced will determine where the price of oil will head to next. The next U.S. stockpiles report will be out in the coming week.

The second item would be the Fed raising interest rates. Now that the Fed has raised rates, it would be prudent to track how the dollar trades. That is because oil prices are highly dependant upon how the dollar trades.

The final item that traders should keep an eye on would be if the OPEC deal is enhanced. If OPEC garners a larger deal with oil producers, then the amount of oil being produced may drop. In that case, oil prices could trade higher.