News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Wall Street
Mixed
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • Becoming a forex trader means living and breathing the excitement, risk and reward of trading in the biggest and most liquid market in the world. Do you have what it takes? Read here to discover the qualities and processes it takes to build consistency: https://t.co/EfWEACQ6Cz https://t.co/qbgOyJ7gwT
  • Forex Update: As of 15:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.17% 🇨🇭CHF: 0.14% 🇦🇺AUD: -0.05% 🇨🇦CAD: -0.08% 🇳🇿NZD: -0.13% 🇬🇧GBP: -0.38% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/cSsg7l8b4x
  • Indices Update: As of 15:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.05% Wall Street: 0.01% US 500: 0.01% France 40: -0.02% FTSE 100: -0.34% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/CyoJBdYbGT
  • Commodities Update: As of 15:00, these are your best and worst performers based on the London trading schedule: Gold: 0.01% Silver: -0.22% Oil - US Crude: -0.93% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/cZeVIxiAJm
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 93.32%, while traders in NZD/USD are at opposite extremes with 75.03%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/fmCBX0W0w3
  • Commodities Update: As of 14:00, these are your best and worst performers based on the London trading schedule: Gold: 0.07% Silver: -0.21% Oil - US Crude: -0.93% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/MBlfthkrSp
  • Heads Up:🇲🇽 Monetary Policy Meeting Minutes due at 15:00 GMT (15min) https://www.dailyfx.com/economic-calendar#2020-11-26
  • What are some key influences Black Friday has on the economy and stock markets? Find out: https://t.co/KIsvaIWZDN https://t.co/NS7o4MrEok
  • Indices Update: As of 14:00, these are your best and worst performers based on the London trading schedule: Germany 30: 0.06% US 500: 0.04% Wall Street: 0.01% France 40: -0.03% FTSE 100: -0.11% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/zTLPlL868T
  • 🇨🇦 Average Weekly Earnings YoY (SEP) Actual: 6.9% Previous: 7.9% https://www.dailyfx.com/economic-calendar#2020-11-26
Oil Market Looks to Benefit From First OPEC Output Cut in 8 Years

Oil Market Looks to Benefit From First OPEC Output Cut in 8 Years

2016-10-01 01:10:00
Tyler Yell, CMT, Jeremy Wagner, CEWA-M,
Share:

Access Free Trading Guides From DailyFX Analysts Here

The Oil Market failed to follow through to the upside last forward and carry forward what was an impressive rebound in Q2 that saw the price rise from the February 11 low of $26.03/bbl to a high of $50.91/bbl in June. Since the high price was hit, the price of Oil has moved sideways, and there are a handful of fundamental stories that explain why the sideways move could continue or a possible breakdown could arise.

However, an 11th hour deal in Algiers does provide hope that may align with the technical developments occurring in WTI Crude Oil.

Fundamental Drivers of Oil Market in Q4 2016

The key point to lead off is whether or not global demand can provide enough buyers for the aggressive supply on the market. Demand has failed to excite Oil bulls to any significant degree in Q3 2017, and a recent report from the IEA said that we could see oversupply well into late 2017.

Oversupply is a significant problem that many hope the OPEC agreement in Algiers will see rectified. The cartel agreed on September 28 to lower production by 700k barrels a day, which resulted in an immediate spike of ~6% in a reversal of the pump-at-will policy that OPEC passed in 2014.

We could see a continuation of the move higher on the Oil cut agreement as institutional speculators have built up a large short position that may need to unwind if the price pushes higher. Recent data showed put positions (a bearish option position) in late September was at their highest levels since September 2015 right before the price of WTI Crude Oil fell from the mid-$40/bbl range toward the upper $20/bbl. Naturally, these traders were not expecting OPEC to agree on an output limit in Algiers.

The agreement may also help put worries aside for those worrying about the oversupply glut. Put simply; the supply side has seemed overbearing as demand could continue to fall. Another discouraging development in late Q3 was the World Trade Organization (WTO) reducing their Global GDP forecast to 1.7%. The lowered forecast exposes the financial stress that is facing Oil producers such as Saudi Arabia, Iran, Venezuela, and private US producers to name a few. Iran is facing a presidential election, Saudi Arabia injected $5B+ into local banks to stabilize them, and Venezuela has had a sharp downturn, and many US private producers seem to be barely holding on with their debt-laden balance sheets. All of these components lend to argue for further or worse oversupply conditions than at present even with the recent Algiers deal.

Another key aspect that we continue to watch, which doesn’t get as much attention is the direction of the US Dollar. There was little coincidence that the US Dollar Bull Market took off in July 2014, which was subsequently the last time the price for a barrel of WTI Crude was above $100. Going back to the peak of the 2014/2015 bull market in the US Dollar, the USD currently sits at the lower third of its price range dating back to March 2014. However, the direction of the Dollar Index (DXY) should be worth watching as another short toward the top of its recent range at 100 would likely put considerable pressure on the price of Oil in addition to the oversupply concerns mentioned above, and the institutional selling pressure that is building.

While there is hope at the start of Q4 that the worst is behind us regarding low prices, the market will look for demand to catch up to the hopefully falling supply in the Oil market.

Technicals: Crude Oil Price Buoys Above Trend Indicator

If you wipe the name off the chart and analyze solely the technical picture, crude oil price appears to have some wind to its sails. The key level to watch is the 200 day simple moving average, which is a commonly used trend indicator.

In Q3 2016, the yearly Rate of Change (ROC) in crude oil turned positive for the first time in over 2 years (see purple sub-chart). Factor in that the weekly price is above the Ichimoku cloud (not shown) for the first time in 2 years and you have some bullish undertones building.

Additionally, bulls may identify the potential inverse head and shoulders pattern. This is a bullish pattern that would be activated on a break above the neckline near $53. A successful break above $53 has a higher probability chance of continuing to the next level of resistance near $62. A common target for H&S patterns is adding the distance of the head to the neckline (~$24) to the point of break out ($53). The technical pattern offers an eventual target of $77.

Crude oil price has reacted cleanly to the 200 day simple moving average for the past year and a half offering 5 touches of price support and resistance. Therefore, a move below the common trend indicator would be worrisome to the H&S pattern traders. A break below would open the door to more bearish potential towards $40 and then possibly $35.

Bottom line, if prices remain above the 200 day simple moving average, then respect the potential for the bullish patterns to play out. Since price has reacted cleanly to the 200 day simple moving average in the past, then a break below would signal the bears are back in control.

Oil Market Looks to Benefit From First OPEC Output Cut in 8 Years

Oil Daily Chart Created by Jeremy Wagner, Head Trade Instructor with Trading View Charts on DailyFX.com

Written by Tyler Yell, Currency Analystand Jeremy Wagner, Head Trade Instructor for DailyFX.com

Disclaimer

DailyFX Market Opinions

Any opinions, news, research, analyses, prices, or other information contained in this report is provided as general market commentary, and does not constitute investment advice. DailyFX will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

Accuracy of Information

The content in this report is subject to change at any time without notice, and is provided for the sole purpose of assisting traders to make independent investment decisions. DailyFX has taken reasonable measures to ensure the accuracy of the information in the report, however, does not guarantee its accuracy, and will not accept liability for any loss or damage which may arise directly or indirectly from the content or your inability to access the website, for any delay in or failure of the transmission or the receipt of any instruction or notifications sent through this website.

Distribution

This report is not intended for distribution, or use by, any person in any country where such distribution or use would be contrary to local law or regulation. None of the services or investments referred to in this report are available to persons residing in any country where the provision of such services or investments would be contrary to local law or regulation. It is the responsibility of visitors to this website to ascertain the terms of and comply with any local law or regulation to which they are subject.

High Risk Investment

Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain losses in excess of your initial investment. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES