Crude oil drops for fifth day
Fawad Razaqzada April 21, 2017 1:09 PM
Crude oil has extended its falls for the fifth day. A barrel of Brent oil now costs less than $52 while WTI is at $45.50 at the time of this writing. At these price levels, both crude contracts have reached key technical support levels, and so may bounce back a little ahead of the weekend. They have not responded whatsoever to the latest OPEC headlines. According to Reuters, citing a source familiar with the matter, the OPEC and non-OPEC technical committee recommended that producers extend a global deal to cut oil supplies for six months from its June expiry. Speculators are understandably sceptical as they are not sure if non-OPEC members will agree to any new deal. As before, the key concerns is the US, where supply of oil remains excessive. Here, inventories have been climbing to new record high levels recently as shale producers ramped up production again as prices recovered. However demand for crude oil is also robust. Indeed, the US Energy Information Administration (EIA) expects record-high gasoline demand of 9.5 million barrels per day as the driving season shifts into a higher gear. This should help to absorb some of the excess supply. Consequently, I still think that crude prices will be able to rise again due to the efforts of OPEC and some non-OPEC countries to limit oil production, and as demand in the US is set to rise further.
The price of oil has collapsed into a potentially strong support area. As can be seen from the chart, below, WTI has tested the prior resistance and the 61.8% Fibonacci retracement level around the $49.50 area today. Once resistance, this area could turn into support, leading to a potential bounce. However, so far there’s no sign of a bounce so we may see a deeper pullback, perhaps towards the 200-day moving average at just below $49.00, or possibly even the 78.6% retracement level at $48.50. But in the event of a short-term bounce, traders will now need to watch price action around old support and resistance levels such as $49.60, $50.10 and $50.55 as these could now turn into resistance. However if they don’t and especially if the $50.55 level breaks then we may see a strong recovery towards the $55 area in the coming weeks. But at the moment, things look bleak from a technical perspective.
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.