Top Story

Crude oil back on a slippery slope

Crude oil prices have been quite volatile of late, owing to a simultaneous rise in supply-side risks and investor concerns over demand. Oil exports have fallen in Iran because of the US sanctions while outages in Venezuela, and elsewhere, have further reduced supply. However, oil shipments from Russia are recovering after contamination affected Druzhba pipeline. This should ease supply concerns slightly, potentially leading to weakness in prices – everything else being equal. With the US supply still plentiful, the market is unlikely to remain tight for too long in any case. Meanwhile on the demand side, incoming data from major oil consumer nations have been poor, suggesting soft demand including for oil. On top of this, we have seen renewed falls in emerging market currencies – most notably in the Chinese yuan – making dollar-priced crude oil dearer to purchase in those nations. So, the fundamental backdrop may be conflicting, but overall it is not a healthy one. Thus, crude prices could fall back over time.

In fact, oil prices may have already peaked, and we may have seen the start of a new downward trend, judging by the behaviour of price action over the past month or so. Brent, for example, has printed a couple of lower highs and lower lows after topping out at just north of $75.50 on 25th April. On Thursday of last week, it came under renewed selling pressure, before bouncing back on Friday and a little further on Monday. It was up earlier today as well, before turning flat at the time of writing. It looks like Brent is finding stiff resistance from its 50-day moving average, which had previously offered moving support. The broken support at $70.50, which happens to tie in with the 50-day MA, is providing additional resistance. If we see the formation of another bearish-looking daily candle here, like the ones circled on the chart, below, then this could trigger fresh technical selling in the days ahead. As things stand, oil’s path of least resistance is clearly to the downside, but that could change if and when it forms a higher high or creates a reversal pattern at lower levels first.

Source: eSignal and FOREX.com. Please note, this product is not available to US clients


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.

The markets are moving. Stop missing out.

OPEN AN ACCOUNT