Never miss a story from David Song

Subscribe to receive daily updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from DailyFX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to David Song

You can manage your subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Oil Talking Points

Crude pares the small pullback from earlier this week, with oil sitting near the monthly-high ($75.88), and recent price action keeps the near-term outlook tilted to the topside as the Relative Strength Index (RSI) sits in overbought territory for the first time since the start of the year.

Image of daily change for financial instruments

Oil Remain Overbought Despite Jump in U.S. Crude Inventories

Image of daily change for oil prices

Oil may continue to catch a bid over the near-term as the Organization of the Petroleum Exporting Countries (OPEC) and its allies show little to no interest in boosting production, and the ongoing alliance raises the risk for higher energy prices as Saudi Arabia Energy Minister Khalid Al-Falih argues that some would say that the market is ‘oversupplied.’

Image of DailyFX economic calendar

Moreover, the impending U.S. sanctions on Iran are likely keep oil prices afloat as the measures are slated to take effect from November 4, and the weakening outlook for supply may generate a further shift in market behavior even as updates from the Department of Energy (DoE) show U.S. crude inventories increasing a whopping 7975K in the week ending September 28.

With that said, developments surrounding OPEC and its allies may continue to influence the broader outlook for oil, and the current environment may fuel the recent advance in crude prices as there appears to be a material change in retail interest.

Image of IG client sentiment for oil

The IG Client Sentiment Report now shows37.4% of traders are net-long crude, with the ratio of traders short to long at 1.67 to 1. In fact, traders have remained net-short since September 21 when oil traded near $70 even though price has moved 7.0% higher since then. The number of traders net-long is 1.7% higher than yesterday and 16.7% lower from last week, while the number of traders net-short is 5.9% higher than yesterday and 15.6% higher from last week.

The jump in short interest provides a contrarian view to crowd sentiment as oil prices clear the July-high ($75.24), with recent price action raising the risk for fresh yearly highs in crude especially as the Relative Strength Index (RSI) suggests the bullish momentum is gathering pace, with the oscillator holding in overbought territory for the first time since January.Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups!

Oil Daily Chart

Image of oil daily chart
  • Still keeping a close eye on the RSI as it still holds above 70, with oil still at risk for fresh yearly highs if the oscillator pushes deeper into overbought territory;may see the former-resistance zone around $71.00 (50% expansion) to $72.70 (50% expansion) now offer support.
  • Still waiting for a close above the $75.20 (78.6% expansion) to $75.80 (100% expansion) region to open up the topside targets, with the next region of interest coming in around $78.30 (100% expansion) to $79.30 (38.2% retracement).

For more in-depth analysis, check out the Q4 Forecast for Oil

Additional Trading Resources

Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow.

Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018.

--- Written by David Song, Currency Analyst

Follow me on Twitter at @DavidJSong.