Crude Oil Nosedive to 5-Month Lows Discouraging for OPEC

Crude Oil Nosedive to 5-Month Lows Discouraging for OPEC

Fundamental Forecast for USOIL : Bearish

  • Crude Oil falls to lowest levels given Nov as cost support ($47.11) is taken out
  • OPEC stranded in an increasingly formidable scenario
  • Options discernment shows many saying a dump as an opportunity
  • Per Baker Hughes, US Oil Rig count rose 6 to 703 sum display serve vigour on OPEC

Will Crude Oil be means to redeem in 2Q? See a forecast to find out what is pushing marketplace trends!

Crude Oil was a large thesis of a reflation trade that adored explanation of tentative mercantile expansion as commodity prices pushed aloft in Q4/Q1. The arise in line from Nov to Dec was corroborated by what looked to be a ideal storm. In a month of November, a new administration had taken over a White House that was pro-growth in terms of infrastructure and reduce taxes. Also in November, a Organization of Petroleum Exporting Countries (OPEC) concluded to cut prolongation to change a Oil market’s oversupply emanate that had caused a pointy crash. Everything seemed to be going good for Oil.

Fast brazen to a initial week of May and small appears to be going right for a appetite commodity. As of Friday morning, Crude Oil has traded 21.3% reduce in 2017 from a opening operation high of 2017. Some would call this a bear marketplace as evidenced by a 20% drop. However, when we demeanour during a attention alone, there doesn’t seem to be a panic that a cost would indicate. We continue to see bullish call spreads being purchased in a options marketplace in expectation of contingent cost liberation notwithstanding short-term downside still favored. Also, CEO of Marathon Oil, Lee Tillman recently remarkable that from a supply and direct indicate of view, small has altered as a cost has plunged.

Still, a cost thrust in Oil puts OPEC in an increasingly formidable scenario. They have all-but concluded to extend a prolongation quell until a finish of 2017 that in a evident scenario, reduces their income. Of course, this was finished in hopes of balancing a Oil marketplace heading to aloft prices, that would concede them to acquire some-more income from a net benefaction value viewpoint when prolongation resumed to normal levels. However, one ‘stick in a mud’ to OPEC’s devise has been a hedging that took place from US producers when Oil was during $50, that is permitting a to furnish openly as a cost drops and has helped them tighten in ~20% gains given a ~$35 prolongation cost per barrel. Adding insult to injury, on Friday afternoon Baker Hughes International showed that active rigs increasing in a US (i.e., some-more production) for a 16th true week in a US.

The draft subsequent shows Friday’s miscarry after a early morning sell-off. However, if you’ve listened a term, ‘dead count bounce’, it’s being put to a exam in Crude. In other words, we’ll see what Crude Bulls are done of when we get to a Fibonacci section (38.2-61.8% retracement) of a April-May operation that occupy’s 47.50-50.00 zone. If a cost is incompetent to tighten above here on a weekly basis, we could be environment adult for some-more declines.

Crude Oil reached extended downside target, now retracement in focus

Crude Oil Nosedive to 5-Month Lows Discouraging for OPEC

Chart Created by Tyler Yell, CMT

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

The elemental focal points for a appetite marketplace subsequent week:

  • Tuesday4:30 PM ET: API weekly U.S. oil register news
  • Wednesday 10:30 AM ET: EIA Petroleum Supply Report
  • Fridays 1:00 PM ET: Baker-Hughes Rig Count during
  • Friday 3:30 PM ET: Release of a CFTC weekly commitments of traders news on U.S. futures, options contracts

About author

AAA call hinges on budget update

Federal Treasurer Scott Morrison tells Australasian Finance and Banking Conference the government has a clear fiscal plan to return the budget to balance. Picture: AAP ...