Although OPEC is still walking around triumphantly as members keep to their output cut commitments, American shale production has reemerged as a force to be reckoned with as evidenced by the latest bit of inventory data. This is yet another shred of proof that the global inventory glut that has built up over the last few years is still showing no signs of easing, despite the dramatic steps taken to reduce overflowing stockpiles.The latest evidence of this developments comes amid a ninth straight week of inventory additions in the United States.

With US crude oil stockpiles reaching a new record alongside continually climbing production, the same forces that brought prices to their knees in 2016 are rapidly reemerging. Furthermore, despite OPEC’s success reaching its own targets, other non-OPEC participatory nations have not upheld their end of the bargain. The final nail in the coffin however may be the demand side of the equation, especially if a pickup in purchases fails to materialize over the coming months.

Another Week, Another Disappointment

Following a consensus estimate calling for a smaller build to US oil inventories, the latest data reported by the Energy Information Administration earlier in the session smashed expectations, with stockpiles rising by 8.209 million barrels last week.Besides bringing stockpiles to a new record, the data continues to fly in the face of OPEC’s goal of killing off the glut with their collective reduction.Hurting the outlook even further is the sustained rise in US production, especially after daily output hit a 13-month high of 9.088 million barrels per day.Should Baker Hughes rig count data continue to trend higher, production may keep climbing as more producers take advantage of higher oil prices.

Adding to the more bearish outlook was the latest analysis compiled by ratings agency Fitch. According to the report, oil prices are expected to trend below January and February levels during the second half of the year.The resurgence of shale has largely offset any hope for a major drawdown in oil inventories.This reflects the increasingly popular thesis amongst market participants that US shale is gradually becoming the swing producer for the entire market, especially when considering the continued slide in breakeven costs as the industry grows leaner.However, more concerning is Fitch’s adverse scenario in which production outpaces demand for the foreseeable future, resulting in an average price of $40.00 per barrel through the end of 2019.

Although OPEC compliance with the output cut deal is near 98.50%, the problem lies in non-OPEC nations participating in the output cuts.  Figures reported by Russia underscore this issue, with production for February clocking in at 11.110 million barrels per day, almost identical to January numbers.To meet its commitment, production would have to fall by another 100,000 barrels per day during this month.However, this development represents just one side of the equation.The bigger looming problem is weaker demand growth from China.One of the most important occurrences that arose from China’s National People’s Congress was a reduced 6.50% growth target for annual economic activity.This could be a defining factor for the oil market going forward, especially if projected demand growth fails to materialize.

Oil Slide Extended For Third Session

In response to the latest inventory figures, oil prices have slipped, falling to their lowest point in a month.After tumbling below the 50-day moving average last week, the moving average has been acting as resistance, preventing any rebound in prices. However, support has been emerging in the form of an upward trend line that forms the basis for an ascending triangle formation.This is a critical level, with any candlestick close below the trend line potentially opening a path towards $50.00 per barrel and below.Should that be the case, the next major support level besides the psychological point would be the 200-DMA just shy of $49.00 per barrel.If the ascending triangle remains intact, resistance on the upside above the 50-DMA sits firmly at $54.55.

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What Binary Options Traders Should Watch For

Aside from stockpiles and upcoming data due from Baker Hughes on Friday, which will give a strong indication of whether US producers are continuing to add production capacity, the other major items to watch include violence emerging in Africa and OPEC’s view towards extending the deal.Should OPEC members entertain the idea of extending production cuts for another 6-months, the glut in inventories may be able to gradually fade.However, if members maintain their unwillingness to keep output suppressed, it could very well spell disaster for prices over the medium-term, reigniting stockpile fears.Furthermore, growing shale production could forever change the industry, becoming the swing production that indefinitely prevents prices from topping $60.00 per barrel.