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. See our updated Privacy Policy here.

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
More View more
Oil Remains Weak, Further Downside Beckons

Oil Remains Weak, Further Downside Beckons

Nick Cawley, Strategist
Oil Remains Weak, Further Downside Beckons

Talking Points:

  • US crude inventories fall but oil production increases.
  • OPEC cuts and rhetoric currently unable to stem the losses.
  • US crude oil remains stuck in a downward trend.

Fundamental Forecast for Oil: Bearish

US crude oil continues to fall, and is likely to fall further, as shale companies continue to increase production to near-record levels. After rallying sharply on Thursday on news of a larger-than-expected drawdown in oil inventories, US crude gave back all of its gains and currently trades at a two-week low around $44.51/brl. Crude is also nearly $3 lower than Wednesdays high of $47.35/brl.

The latest downturn in oil was prompted by the latest data from the US Energy Information Administration that showed domestic production rising by 1% to 9.34 million barrels a day, a near 10% year-on-year rise, and close to the 1970 average high of 9.6 million barrels. The EIA has also revised down its average price for US crude to $53.81 in 2018 from $55.10 last month.

In addition, while there are conflicting technical signals for US crude, the path of least resistance remains lower. The spot price has just broken the 20-day moving average, a bearish set-up, while a close below the May 4 low of $43.97 will open the way back to the recent low of $42.55/brl. A look at the stochastic indicator however shows the market as ‘oversold’ and may provide some short-term support.

US Crude Oil Daily Timeframe (December 30, 2016 – July 7, 2017)

Oil Remains Weak, Further Downside Beckons

Chart by IG

If you are looking at oil on a slightly longer timeframe, you can get your free DailyFX Third-Quarter Trading Forecast and Trading Guide here.

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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

DISCLOSURES