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Crude Oil Price Forecast: Rising Prices Bring Higher Inventories

Crude Oil Price Forecast: Rising Prices Bring Higher Inventories

Tyler Yell, CMT, Currency Strategist


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Talking Points:

  • Crude Oil Technical Strategy: stability near $50/bbl encouraging Bulls
  • U.S. output rising as producers activate rigs on hopes OPEC will support Oil prices further
  • Gold Prices Fall To 4-Month Lows, Oil Price Sitting At $50 On OPEC Doubts

Crude Oil has been riding a wave of positive fundamental developments over the last few weeks. Between the agreement to agree on a production cut by OPEC that Russia said they would honor and the falling U.S. Inventory data the Bulls had a lot to be happy about. On Thursday, we saw Crude Oil inventories rise for the first time in the U.S. in six weeks. Naturally, many are looking to U.S. Shale producers as activating their rigs as Oil has recently begun trading around $50/bbl, and some are speculating on a move in coming months toward ~$60/bbl.

Interested In a Quick Guide about OPEC, Click Here

In addition to rising stockpiles of Oil in the U.S., traders are still eager to understand more about the OPEC deal, which includes non-members such as Russia. The informal meeting is scheduled for October 29 at Vienna. Volatility is expected to be high around the meetings. Another component worth watching is the US Dollar, which has been on a moon-shot projector lately thanks in large part to the ‘Flash-Crash’ in Sterling. Any instability in the US Dollar after the ~3% rise in nearly two weeks could support the price of Oil as the two are inversely correlated.

Trading View D1 Crude Oil Price Chart: Very Hard To Be Credibly Bearish Above $50

The trendline is drawn from the February 11 low and early August low acts as a clear bias indicator on the price of Crude Oil. As the price remains above the 10-period moving average ($49.79/bbl) the momentum in the ST is bullish while the price above the trendline show’s the medium-term trend remains bullish.

The key resistance remains the June high of $51.64. If the price of Crude breaks above this key zone, we may see an aggressive buying spree by institutional investors who have had an aggressive bullish bias toward a breakout and would likely see a runaway move to the mid-$50s.

Only a hold of $51.64 followed by a break below the 10-DMA and a move toward the trendline support near the 144-DMA ($45.46) would turn us from Bullish to Neutral. Until then, we’ll keep our sights on new 2016 highs in the coming days.

Key Levels Over the Next 48-hrs of Trading As of Wednesday, October 13, 2016


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