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US Crude Oil Price Struggles at Three-Year Highs

US Crude Oil Price Struggles at Three-Year Highs

2018-07-04 08:00:00
Martin Essex, MSTA, Analyst
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Crude oil price, news and analysis:

- The US crude oil price has hit its highest levels since November 2014 as US inventories fall further.

- However, more gains near-term will be difficult to achieve as Saudi Arabia raises output.

Our trading forecasts for Q3 have just been published; you can find the oil guide here.

And check out the IG Client Sentiment data to help you trade profitably.

Crude oil price set to consolidate

The price of US crude oil will likely consolidate near-term after hitting its highest point since November 2014, helped on its way up by news of another fall in US crude inventories. The American Petroleum Institute (API) reported that US stockpiles of crude fell by 4.5 million barrels to 416.9 million in the week to June 29 – well above the 3.5 million barrels forecast by analysts/

That reflected in part an outage at Syncrude Canada’s oil sands facility in Alberta, which usually supplies the US, as well as ongoing political fighting in Libya that is curbing output there. The threat of US sanctions against Iran, a major producer, is also helping to push prices higher.

US crude oil Price Chart, Daily Timeframe (Year to Date)

Latest crude oil price chart.

Chart by IG

However, Saudi Arabia has said it has the capacity to increase production to compensate, as requested by US President Donald Trump, and that could curb further price rises near-term.

As for the technical picture, the price of US crude has traded broadly sideways over the past few days, suggesting a period of consolidation before a possible move higher still.

Sentiment remains positive

Looking further ahead, retail trader sentiment data show 31.0% of traders are net-long, with the ratio of traders short to long at 2.22 to 1. In fact, traders have remained net-short since June 22, when US crude traded near $69.11; the price has moved 5.5% higher since then. The number of traders net-long is 2.4% higher than yesterday and 22.1% lower from last week, while the number of traders net-short is 6.0% higher than yesterday and 20.2% higher from last week.

At DailyFX we typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests US crude prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger US crude-bullish contrarian trading bias.

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Whether you are a new or an experienced trader, at DailyFX we have many resources to help you: analytical and educational webinars hosted several times per day, trading guides to help you improve your trading performance, and one specifically for those who are new to forex. You can learn how to trade like an expert by reading our guide to the Traits of Successful Traders.

--- Written by Martin Essex, Analyst and Editor

Feel free to contact me via the comments section below, via email at martin.essex@ig.com or on Twitter @MartinSEssex

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

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