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Crude Oil Analysis Suggest Positive Momentum Remains Despite Uncertain Backdrop

Crude Oil Analysis Suggest Positive Momentum Remains Despite Uncertain Backdrop

2020-04-12 00:00:00
Nick Cawley, Strategist
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Crude Oil Price, Chart and Analysis.

  • OPEC+ and G20 meeting dominate oil’s fundamental outlook.
  • A series of higher lows suggest sentiment remains positive.
Oil - US Crude BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 12% -2% 6%
Weekly 9% -8% 1%
What does it mean for price action?
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Crude Oil - Looking to the Future

The OPEC+ meeting last Thursday and the G20 meeting on Friday look set to trim oil output in the coming months, as producers react to the global growth slowdown. As we write, OPEC+ source reports are suggesting a 10 million barrel a day cut going forwardwith further wrangling and/or ratification at the G20 meeting. While oil’s fundamentals are still up in the air - but likely to be settled very shortly – the technical backdrop is suggesting a continuation of the recent rally in the oil complex.

Brent crude hit a multi-decade low of $24.75/bbl. at the beginning of April after having hit a peak of $71.06/bbl. on January 8 this year. Fears that the coronavirus would hammer global growth – currently being borne out – and infighting between OPEC and OPEC+ members left oil with little support. The daily chart now is beginning to tell a slightly different story. Oil remains volatile and any good news can cause a sharp spike higher. On April 2 oil traded in a 40%+ day range, as good news filtered through and although these gains were paired, oil pushed back above the April 2 high today, suggesting further upside. On the way, oil has made 8 higher lows in a row, another positive set-up, and in doing so has now moved back above the 20-dma for the first time since late-February. These higher lows have helped to form a short-term bullish pennant. As long as the supportive trend remains in place, oil looks to move higher.

Brent crude now needs to close above both the 23.6% Fibonacci retracement level at $35.68/bbl. and the April 2 high at $36.40/bbl. before it can push higher. The daily chart also shows a ‘gap’ between $40.01/bbl. and $45.23/bbl. that needs to be filled. Gaps, an area where no trading took place, are normally filled, more so during times of extreme volatility. In the middle of this gap is 38.2% Fibonacci retracement at $42.44/bbl.

While oil’s immediate future will be decided by the oil minister’s meeting, if the trends on the daily chart remain in place, then positive momentum should continue. However a break through support would see $30.00/bbl. as the short-term target.

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Crude Oil Daily Price Chart (March 2019 - April 9, 2020)

Crude Oil Daily Price Chart

Traders may be interested in two of our trading guides – Traits of Successful Traders and Top Trading Lessons – while technical analysts are likely to be interested in our latest Elliott Wave Guide.

What is your view on Crude Oil – bullish or bearish?? You can let us know via the form at the end of this piece or via Twitter @nickcawley1.

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