Crude probes resistance ahead of oil stocks data
Fawad Razaqzada July 16, 2019 7:36 AM
Brent and WTI were both hovering just below the lower end of their respective resistance areas of $67.00 and $60.00 after starting the session on the front foot.
Crude oil ended higher in its third positive close out of the past four weeks, thanks to ongoing Middle East tensions, falling US crude inventories and storm Barry in the Gulf of Mexico – all raising short term supply shock risks. But Hurricane Barry was not as destructive as feared after making landfall on the Louisiana coast on Saturday with winds barely meeting hurricane criteria. For that reason, crude oil speculators evidently took profit on Monday which saw prices fall noticeably. Both oil contracts started Tuesday on the front ahead of US oil inventories data.
Monday’s selling did indeed look like it was driven by profit-taking and technical selling given the small ranges oil prices had traded around in the closing days of last week, after a burst of bullish momentum earlier in the week had probably seen speculators tighten their stop loss orders to protect their profits from evaporating in what is a headline-driven market. In addition, both contracts had reached key resistance levels with Brent at $67/68 and $60/61 range, levels which were formerly support and now resistance. Unless these resistance levels break, there is a risk we may see a deeper pullback in the coming days amid concerns over a deteriorating demand outlook.
On the supply side, traders will be watching the latest US oil inventories data closely after the recent sharp falls in oil stocks. If we see more unexpectedly sharp de-stocking in crude inventories, then this could keep prices supported for a while yet. However, if a bigger build is reported then this will likely give speculators an excuse to sell oil aggressively after the recent rally, which may have potentially ended following Monday’s sell-off around the resistance levels mentioned above. The American Petroleum Institute (API) will report their unofficial figures tonight ahead of the government data from the Energy Information Administration (EIA) tomorrow afternoon.
Ahead of these, Brent and WTI were both hovering just below the lower end of their respective resistance areas of $67.00 and $60.00 after starting the session on the front foot. So, there was the potential for prices to turn lower given yesterday’s bearish-looking price candles.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.