WTI may break higher as storms limit crude processing
Fawad Razaqzada September 7, 2017 12:48 PM
US oil production facilities haven't fully recovered from Hurricane Harvey and now the even more powerful Hurricane Irma is set to reach the Gulf of Mexico in the next couple of days, and another one, Jose, is brewing in Atlantic. Any further disruptions in oil and gas production could further extend the rally in energy prices or at minimum keep prices bid until the threat of tropical storms dissipate. Indeed, last week saw refiners process less crude as Hurricane Harvey hit Texas and Louisiana. As energy industry operations shut down, crude oil stockpiles rose by a good 4.6 million barrels according to the latest Energy Information Administration’s weekly supply data. Because of reduced processing of crude oil, inventories of gasoline and diesel fell. This is hardly surprising. It will be interesting to see how the supply situation in the US evolves over the coming days and weeks. We expect to see more of the same, though it won’t have any long-term impact on oil prices. In the short-term oil prices should remain supported.
As a result of the oil price upsurge, WTI is now finding itself at a good $49.15 per barrel. It is thus testing the lower bound of the key $49.10 to $50.40 resistance range. Here, a bearish trend line converges with the 200-day moving average and the 61.8% Fibonacci retracement level against this year’s high hit in January. The top of the range marks the last swing high, which means a pool of liquidity will be resting above this area i.e. buy stop orders from the existing sellers, and buy stop orders from breakout bullish speculators. The cluster of resting buy orders may attract the price of WTI towards it, leading to a bullish breakout soon. If that potential breakout holds, things could then become rather interesting. Otherwise, expect choppy price action. Meanwhile if support at $48.70 gives way first then there is a possibility for a pullback towards the last broken resistance at $47.60/5 area.
Source: eSignal and FOREX.com.
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