Crude oil prices touched the $60 per barrel handle on news that a pipeline in Libya exploded, knocking a sizable portion of supply offline. Prices remained elevated, as the issue will reduce production by nearly 100K barrels of oil a day. The technical look strong, ahead of this week’s inventory numbers which will be delayed because of the Christmas Holiday.
Technicals
Crude oil prices broke out above horizontal trend line resistance near 59.05, hitting 60.01 in early trade on Wednesday, and poised to test target resistance near the May 2015 highs at 62.58. Support is seen near former resistance near 59.05, and then the 10-day moving average at 58.01. Momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average) of the MACD line.
The Incident
The oil pipeline carries crude oil to the Es Sider oil export terminal, Libya’s largest, raising fears of a dramatic supply outage. Early reports suggest that the explosion was the result of an attack by militants, although the precise cause was unclear.Libya’s National Oil Company said that the incident will curtail output by 70,000 to 100,000 barrels per day. The National Oil Company said that Waha Oil Co. “has immediately diverted production to the Samah line,” which will help keep oil flowing. “However, NOC expects a reduction in production of 70,000 to 100,000 barrels a day.”
The Es Sider terminal was one of the main export facilities that suffered disruptions in recent years, and its return to operation is what has helped Libya ramp up oil production and exports, restoring shipments to 1 million barrels per day from less than half of that a little more than a year ago.
U.S. Consumer Confidence Dropped
U.S. consumer confidence plunged to 122.1 in December from a revised 128.6 in November (was 129.5). The present situation index improved to 156.6 in December from a revised 154.9 which was 153.9 in November. The expectations component fell to 99.1 in December from a revised 111.0 which was 113.3 in November. The jobs strength diffusion index, which is the difference between jobs plentiful and jobs hard to get, slipped to 20.5 from a revised 20.7 in November. The 1-year ahead inflation index rose to 4.8% in December from a cycle low 4.5% in November that was also seen last August. The drop in total confidence was more pronounced than expected, leaving a disappointing report overall.