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Oil Remains Robust Ahead of OPEC Meeting

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Crude Oil Price Forecast Talking Points:

  • WTI Crude Oil Technical Analysis Strategy: Bullish continuation anticipated in a volatile environment
  • IEA focuses on negative supply shocks from Venezuela as US inventories drop below 5-year average
  • Trader Sentiment Highlight from IG UK: retail short positions favors further advances

There may be too many geopolitical developments to price in as a potential ‘what-if’ range of WTI Crude. Earlier today, IEA Executive Director Fatih Birol on a Bloomberg Interview tagged the sharp drop in Venezuelan output, which has turned the economically strained company to a net-importer as a key concern for the market.

The major supply crisis has caused the physical supply market to tighten and has said policymakers wanting a balanced market should be careful what they wish for as consequences would be dire if prices increase significantly.

Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2

US Crude Inventories Are Below 5-Yr Average

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Data source: Bloomberg, EIA

WTI volatility has hit a two-month high ahead of weekly EIA Crude Oil Inventory reports, which has shown a persistent decline in the US inventories that recently fell below the 5-year average of 424,000 barrels. The price of crude has been rising on falling inventories, which is supported by calendar spreads in the futures market that shows a premium for buying and holding now as opposed to waiting to buy later.

IEA Flags Venezuela As Key Oil Price Risk

Venezuelan Oil Output Has Turned The Country To A Net Importer.

Data source: Bloomberg, OPEC

While much has been made of Middle East tensions and rightfully so, traders should also remember that Venezuela continues to face the risk of further significant output losses this year due to their domestic economic crises.

OPEC+ Meeting Preceded by ‘Chatter’ On Possible Output-Cut Extension

Despite resounding successes from the current Oil production curbs from OPEC and strategic alliances like Russia, the idea is being spread that a further output-cut extension could be discussed. The risk premium has allowed Crude Oil to trade to the highest levels since December 2014 that is currently deflating.

The meeting will take place on Friday in Jeddah with energy ministers from Saudi Arabia, Russia, UAE, Oman, Algeria, Kuwait, and others that will undoubtedly discuss the Aramco offering and the increased production from the US shale producers who continue to add wells. The official meeting that has the potential to formally announce an extension will take place in June.

Technical Focus Looks to Price > Ichimoku Cloud, Bullish Channel

The broad bullish trend on Crude Oil traded to the top of a price channel that began in Mid-February. The price has pulled back from resistance, but fundamental factors continue to support the overall bullish view.

Without a sharp break below the channel base near $63/bbl, and further to $61.8/bbl (April opening range low), traders should anticipate a resumption to new highs that could continue to trade to the channel top impulsively.

Chart Watch: Crude Price Continues To Ride Channel Top, Bullish Shocks Still Likely

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Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

WTI Crude Oil Insight from IG Client Positioning

Crude Oil Price Forecast: Oil Remains Robust Ahead of OPEC Meeting

Insight from IG UK shows us that 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Apr 09 when Oil – US Crude traded near 6373.7; the price has moved 4.2% higher since then.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil – US Crude prices may continue to rise. (emphasis mine.)

—Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

Join Tyler’s distribution list.



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Top Tier Data, Risk Aversion Portend Volatility

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Financial markets may face breakneck volatility as a steady stream of heavy-duty scheduled event risk is compounded by wild swings in sentiment.

US Dollar Forecast: US Dollar Rally Poised to Continue as Market Sentiment Sours

The US Dollar may continue to push higher as haven demand amid deteriorating market sentiment takes over from Fed policy bets as the catalyst du jour.

British Pound Forecast: Oversold or Still in a Downtrend?

There is an argument to be made that Sterling has suffered enough and that most, if not all, of the bad economic backdrop has been priced in. But is next week the week to have that argument?

Australian Dollar Forecast: Australian Dollar’s Fall Could Resume If US Numbers Hold Up

The Australian Dollar faces a week full of US economic data, but much shorter of domestic numbers. This could see USD back in the ascendant, if only for lack of AUD-specific impetus.

Chinese Yuan Forecast: Yuan May Benefit from Capital Inflows, Trade Talks and Chinese PMI

Capital inflows could remain high around June 1, when A shares are officially included in MSCI indices; trade talks may solve some discrepancies; PMI gauges could boost the outlook of a sustainable recovery.

Crude Oil Forecast: Crude Spills on Saudi’s Proposed Increase, Short-Term Top Likely

Crude oil hit a wall as OPEC and its allies are said to increase production while total US inventories swelled by the most since February.

Equities Forecast: S&P, Dow, DAX & FTSE – A Cautionary Pause Begins to Show

While US equities remain in a state of consolidation, matters are a bit more worrisome across the Atlantic, as both the DAX and the FTSE have put in bearish reversal formations.

Weekly Forecast: Top Tier Data, Risk Aversion Portend Volatility

See what live coverage is scheduled to cover key event risk for the FX and capital markets on the DailyFX Webinar Calendar.

See how retail traders are positioning in the majors using the IG Client Sentiment readings on the sentiment page.



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Euro Moving Towards Key Support to Curb Persistent Selling

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EUR/USD TECHNICAL HIGHLIGHTS:

  • EURUSD selling shows no signs of abating, close below Jan 2017 trendline sets up further weakness
  • Key risk events on the calendar come in the form of Eurozone inflation and US NFP report

For the intermediate-term fundamental and technical outlook on EUR/USD, check out the recently released DailyFX Quarterly Forecast.

The theme of selling EURUSD has shown no signs of abating with the pair now trading around the mid-1.16 area. Last week saw the trendline dating back to January 2017 offer some mild support on Wednesday, however, another bout of Euro weakness saw the trendline support ultimately breached. A close below the trendline could provide a telling sign that another leg lower will be in store for the pair.

As we look ahead to next week, risk events on the calendar for the Euro will come in the form of the Eurozone inflation and the latest US NFP report. In terms price action, the aforementioned breach of the Jan’17 trendline sets up run in on the 2016 high situated at 1.1616, while a weekly low from November 7th at 1.1553 looks to be pivotal, a break below will likely see an extension of the bear run. Resistance on the topside resides at 1.1709, marking the 38.2% Fibonacci Retracement of the 1.0340-1.2556 rise, alongside 1.1750 (May 24th high).

EURUSD bulls on the longer term may find comfort in the fact that the Relative Strength Index on the daily chart is in oversold territory, which could indicate that the pair may see a modest reversal in the near-term. However, when the pair has previously been in oversold territory the rebound has been mild at best and followed by another wave of selling.

EURUSD CHART: DAILY TIMIE-FRAME (Sep 16-May-18)

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Chart by IG

HELPFUL RESOURCES FOR FOREX TRADERS

Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

— Written by Justin McQueen, Market Analyst

To contact Justin, email him at Justin.mcqueen@ig.com

Follow Justin on Twitter @JMcQueenFX



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Crude Spills on Saudi’s Proposed Increase, Short-Term Top Likely

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Crude Spills on Saudi's Proposed Increase, Short-Term Top Likely

Fundamental Forecast for USOIL: Neutral

Talking Points:

  • The ONE Thing:Saudi turning on the spigots may lead to lower prices, but bullish environment remains. OPEC rhetoric is rightly center stage as oil traded notably weaker toward week’s end. Saudi Arabia’s oil minister, Ali-Falih, said he sees a ‘likely’ oil supply boost in H2 2018.
  • Per BHI, U.S. Oil Rig Count rises to 859, US total count at 1059
  • Crude Oil Price Forecast: Brent Premium Favors OPEC Induced Volatility
  • The technical analysis picture of crude oil shows a sharp pullback off 3-year highs. Chart support comes in for the WTI front-month contract at $67.50/$64.50 per barrel.

Crude had the first weekly decline for the month of May as OPEC’s comments spooked bulls. More oil coming out of Saudi & Russia is helping to narrow a popular futures calendar spread that helped to visualize the bullish support for crude that weakened this week.

Shortage Fears Wane on OPEC+ Rhetoric

Crude Spills on Saudi's Proposed Increase, Short-Term Top Likely

Data source: Bloomberg

Seemingly bearish rhetoric took hold of the Oil market causing the price to fall on Friday. Multiple reports came about OPEC, and their allies that are collectively known as OPEC+ as rolling back production cuts. There remains uncertainty about Venezuelan and Iranian supply that has likely supported these comments from OPEC+.

The front-month WTI crude contract broke back below $70 and calendar spreads between December 2018 to December 2019 futures contracts narrowed to the weakest levels in more than a month. The wide spread aligned the move above key resistance levels.

Additionally, owners of oil producer equities are likely not as concerned as an exposed futures traders given that many producers have been locking in high prices through hedging via options.

Crude has nearly erased May’s Gains With ~3.5% Drop Last Week

Crude Spills on Saudi's Proposed Increase, Short-Term Top Likely

Data source: Bloomberg. Created by Quasar Elizundia

Once again, WTI and Brent crude has become the market everyone is discussing! Unlock our forecast here

Big Pullback on 240-Minute Chart

Crude Spills on Saudi's Proposed Increase, Short-Term Top Likely

Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT

The sharp pull-back is seen well with RSI(5) on the four-hour chart. The RSI(5) has hit the lowest point since crude began its impressive ascent from $58/bbl in February to above $72/bbl earlier this week.

Since the news came that Saudi and Russia are considering easing global output cuts, the price dipped aggressively lower. Oil has its first weekly loss for the month on Friday’s nearly 3% loss.

Traders can look to trendline support zone and prior structure support points near $64.50/67.50 as likely support on the pullback. A deeper move below this zone would shift me from neutral to cautiously bearish, but the broader cycle change favoring commodities makes this a difficult view to hold.

Not familiar with Ichimoku? You’re not alone, and you’re in luck. I created a free guide for you here

Next Week’s Data Points That May Affect Energy Markets:

The fundamental focal points for the energy market next week:

  • Monday: US Memorial Day
  • Monday: Statistics Norway releases quarterly survey on planned investments in the oil industry
  • Wednesday (delayed for holiday) 04:30 PM ET: API Weekly Oil Inventories Report
  • Thursday (delayed for holiday) 11:00 AM ET: EIA issues weekly US Oil Inventory Report
  • Thursday 12-2pm: EIA releases monthly report
  • Friday 1:00 PM ET: Baker-Hughes Rig Count
  • Friday 3:30 PM ET: Release of the CFTC weekly commitments of traders report on U.S. futures, options contracts

Forex Trading Resources

DailyFX offers a surplus of helpful trading tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client

Sentiment shows the positioning of retail traders with actual live trades and positions.

Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis,

our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

—Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical

analysis that is powered by fundamental factors on key markets as well as

trading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET.

Talk markets on twitter @ForexYell

Join Tyler’s distribution list.

https://www.dailyfx.com/free_guide-tg.html?ref-author=Yell



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