WTI crude oil breaks $50 barrier
Fawad Razaqzada October 6, 2016 6:34 PM
Crude oil prices are on track to rise for the seventh consecutive day. For the first time since June, a barrel of oil in the US costs more than $50 again. From around $44.50 a barrel towards the end of last month to today’s current high of $50.50, WTI has thus risen a solid $6 or in percentage terms more than 13%. While some would argue that the buying may be a little overdone, there is still no end in sight for the current bullish run. Speculators have been buying every short term dip, a strategy that has evidently been working very well so far. This trend could well continue for some yet as after all crude oil’s fundamental outlook continues to improve: as well as the planned OPEC oil output cut, we have seen surprise inventory destocking in the US for five straight weeks now. Consequently, US oil stocks have now fallen below 500 million barrels for the first time since January. In addition to the prospects of reduced supply, the outlook for oil demand appears to be healthy too, judging by this week’s key US economic data which have been mostly positive, with the key ISM manufacturing and services sector PMIs both coming in stronger than expected and unemployment claims unexpectedly falling last week to near a 43-year low. Buck-denominated oil prices are also showing resilience against the surging dollar, too, which is another bullish sign that not many people are talking about.
On top of all the fundamental factors, the recent breakout above key short-term resistance levels have probably encouraged momentum-based buying interest, too. WTI appears to be heading towards $50.90, a level which had been resistance in the past. If it manages to break above here then the top of the recent range at $51.65 could be the next bullish target to watch. I, however, think the rally could potentially go much further, obviously not in a straight line. A couple of very interesting levels that I would be watching are around $55 and then at $59.30/40. As can be seen on the chart, these are where several Fibonacci levels converge, which make them ideal profit-target areas for market participants who like myself use the Fibonacci tool in their analysis and trading. So there is the potential for WTI to climb to those levels and possibly find resistance there amid profit-taking. As things stand only a potential drop back below old resistances at $49.10 or $47.70 would invalidate our technical bullish view on WTI oil.
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.