Want To See What The Pros Expect Of Oil In Q2? Access The Q2 Market Forecasts HERE
Talking Points:
- Crude Oil Technical Strategy: Long above Q2 Opening Range @ $49.91/bbl
- A weak US Dollar could lift Oil toward $60/bbl in H2 2017 if OPEC extends cuts
- Saudi exports fall to 21-month low showing active balancing working
The Oil business has always been a messy business, which has led to a messy market. However, there are signs that the often-critiqued plan from OPEC to reign in production to balance the market is working. On Tuesday, data from Joint Organization Data Initiative in Riyadh showed that Saudi’s oil exports had fallen below 7 million barrels a day, which is the lowest level since May 2015. Score one for good timing if you are a Crude Oil Bull because the announcement of the planned falling crude oil exports from OPEC’s largest producer aligned with an upgraded global growth forecast from the IMF.
The weekly chart below smooths out some of the day-to-day volatility but shows a few key Bullish developments with one main concern. The excitement comes from price stability above the 55-WMA and
the Weekly Ichimoku Cloud. Both technical indicators are long-term trend bias filters, and the price trading above them favors the next shock to be higher as opposed to lower.
Another good measuring point for Crude Oil is the Q2 Opening Range low at $49.91/bbl. Swing traders looking for short-term support can look to the 38.2% retracement of the March-April range at $51.20/bbl. Opening Ranges are a simple binary approach (price above or below) to help see whether momentum has been Bullish or Bearish after a starting session of a specific time series. If the price remains above $49.91, it would be hard to argue that Bearish pressure has staying power. When looking at institutional speculators with the CFTC Committment of Traders Index published every Friday, we see that net-longs increased from speculators for the second week in Crude Oil futures, which argues that smart traders are looking for further upside.
The concern when looking at the chart is the yellow rectangle that encapsulates the price range of the extreme week at the beginning of the year with an intra-week high of $55.21. Therefore, you can see we’re stuck between the Opening Range high of Q1 at $55.21 and the Opening Range low of Q2 at $49.91. Given the fundamental support that looks to be developing as the price trades above the opening range, the Oil market looks to be setting up an increasing likelihood of a break above the $55.21, which would likely see us trading above $60/bbl. A break below the Q2 opening range at $49.91 would open up downside targets at the long-term support of $41.77.
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Chart Created by Tyler Yell, CMT
Oil – US Crude: Retail trader data shows 39.8% of traders are net-long with the ratio of traders short to long at 1.51 to 1. In fact, traders have remained net-short since Apr 10 when Oil – US Crude traded near 5266.2; theprice has moved 1.0% higher since then. The number of traders net-long is 7.3% lower than yesterday and 20.3% lower from last week, while the number of traders net-short is 4.6% lower than yesterday and 1.5% lower from last week.
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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil – US Crude-bullish contrarian trading bias. (Emphasis Mine)
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Shorter-Term US OIL Technical Levels: Tuesday, April 18, 2017
For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours.
Contact and discuss markets with Tyler on Twitter: @ForexYell