Another crude roller-coaster ride for oil traders
Fawad Razaqzada September 5, 2016 6:00 PM
North American investors are away in observance of the Labor Day. Understandably, it has been a quiet day in FX, bond and stock markets. But for one particular market, it has been an exceptionally volatile day. Crude oil took a roller coaster ride, rising nearly 5% this morning before giving up much of those gains.
Oil prices rallied sharply this morning on reports that Saudi Arabia and Russia will make a joint statement at the G20 meeting; there was speculation that a freeze deal or something similar may be announced.
But as it turned out, the announcement was a bit of a damp squib. Russia and Saudi Arabia merely signed a joint agreement to establish a ‘working group’ in order to find ways to minimise volatility in the oil market, and there was no immediate plans to restrict crude output. What’s more, Saudi’s energy minister said that oil prices are improving and that freezing production is not the only solution.
So, uncertainty remains on the oil market ahead of this month’s unofficial meeting of the OPEC. They have talked the talk, now it is time to walk the walk. But judging by today’s events that is exactly what they are hopefully working towards with the largest oil producers finally taking some proactive steps in order to shore up oil prices.
From a technical standpoint, Brent oil remains contained inside converging trend lines, which basically means crude is in consolidation mode. The good news is a breakout is forthcoming in one or the other direction. With price action looking bullish on the higher time frames, a bullish breakout is what we are expecting to see in the coming weeks.
This can be confirmed by a sustained break above the bearish trend line and ideally above the $50.00-$50.85 resistance range.
However, if Brent moves below the bullish trend line then a deeper pullback will be likely before we see another leg higher at some point down the line. The key medium-term support range to watch is around the $42.00-42.50 level where the prior low meets the 200-day moving average.
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.