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Fundamental Forecast for Oil: Bearish
Oil prices took a strike this week, and with Tropical Storm Nate brewing in a Gulf of Mexico, a intensity for deeper waste remains. In West Texas Intermediate, cost movement continued a bearish decrease after carrying run into a pivotal area of insurgency final week, while Brent Crude (UK Oil) put in a third bar of an dusk star arrangement on a weekly chart, and this can open a doorway to deeper waste there, as well. Earlier in a week, the American Petroleum Institute (API) expelled wanton register information reflecting a rather poignant drawdown in wanton oil inventories of -4.08 million barrels in a week prior; good over a approaching pull of -466.1k. Normally, this would be a bullish cause for Crude as discontinued reserve prove a intensity for aloft prices; but, this was equivalent by an even incomparable build in gasoline inventories, highlighting a intensity for serve disruptions with Tropical Storm Nate melancholy a Gulf of Mexico.
The judicious doubt is because a pleasant charge or a intensity whirly competence negatively impact Oil prices. Many will observe rising gasoline prices during a identical forms of crisis, so because competence Oil prices be relocating down while Gas prices are going up? We saw something identical uncover in latter-August around Hurricane Harvey when a vast series of excellence operations in South Texas, around a Gulf of Mexico, were knocked offline. This highlighted that a Oil being extracted could not be polished into Gasoline, during slightest not during a same gait as prior; so reserve built-up as refiners battled to redeem from a extinction of a hurricane’s impact. This building supply bolt of Crude meant that prices moved-lower as markets wrestled with a awaiting of an even bigger picture-slowdown. And in latter-August, we saw WTI tumble next a $46-level as worries about a Hurricane’s impact continued to build.
But as a hazard of continued disruptions around Harvey began to solemnly waste in early-September, bulls began to lapse into WTI, and within a integrate of weeks we were already back-over a $50 level. As that pierce continued by a second half of September, an engaging turn of insurgency began to show, and this is subsequent from a trend-line that originates all a approach behind in 1998-2001 that continues to lift some component of temperament in WTI prices. Last week saw 4 days of insurgency build during a under-side of that trend-line, identical to what was seen in May of this year, before bears took-over to pull prices behind next $50/barrel.
WTI Weekly: Long-Term Trend-Line Helping to Set Current Resistance
Chart prepared by James Stanley
Below on a daily chart, we’re focusing in on this insurgency rhythm after final week’s annulment off-of-the-highs.
WTI Daily: Resistance during Trend-Line Projection in May, September
Chart prepared by James Stanley
So, while a apportionment of this new sell-off is expected entrance from jitters around a intensity for refiner disruptions in a Gulf of Mexico as Tropical Storm Nate bears down, there’s expected also some technical offered holding place and serve contributing to this new decline. Given a multiple of both technical and elemental factors that could serve minister to deeper declines, a foresee for Oil will be set to bearish for a week ahead.
— Written by James Stanley, Strategist for DailyFX.com
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