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Talking Points:
- Crude Oil Technical Strategy: Oil stability near $50/bbl despite fundamental headwinds encouraging
- Baker-Hughes Rig Count rises for seventh straight week to total of 539
- Oil Price Closing in on Fourth Straight Weekly Gain, Gold Price Stable at $1,250/oz.
A strong USD doesn’t appear to be doing the damage to the price of Oil that it has in the past. This week has seen doubts creep in about the probability of the OPEC deal coming to fruition where all 14 members and a few key non-OPEC members like Russia agree to cut production. It is fair to say that the small amount of individual production cuts relative to total capacity could increase the size of the pie and benefit all countries if the price of Oil rises toward ~$60/bbl.
In addition to OPEC doubts, DoE inventory data on Thursday showed an increase in aggregate inventory in the U.S. toward ~5M bbl and Friday saw the Baker Hughes Rig Count rise for the seventh straight week to eight-month highs when it rose by 4 active rigs to a total of 432. Naturally, a further rise in the price of Oil, which will discuss below would likely see the active rig count continue to rise.
Interested In a Quick Guide about OPEC, Click Here
On Friday afternoon, Janet Yellen spoke at the Boston Fed Annual Economic Policy Conference where she gave no hints about the possibility of a December rate hike. Yellen did speak about running a “high-pressure economy,” that could help boost productivity growth and improve the labor market. If she follows through on this view, which could argue for a possibly weaker US Dollar that could further support the price of Oil given the USD and Oil tend to trend in opposite directions.
Trading View D1 Crude Oil Price Chart: Very Hard To Be Credibly Bearish Above Multiple Support Points
We have long been a proponent of a Bullish or Reverse head and shoulder pattern in Crude Oil that we discussed in our Q4 Oil Forecast. The Bullish pattern could take the once-battered commodity as high as $78/bbl.
Recently, Jeremy Wagner, CEWA-M and Head FX Trading Instructor shared a bullish Elliott Wave pattern for Crude that remains valid if the price of Oil remains above the September 23 high at $46.53. From a positioning point of view, the Daily Sentiment Index as of Wednesday’s Close shows the Futures Market is roughly 67% Bulls, which is a long ways from the topping extremes that come with ~85-90+% Bulls. This could make room for the argument that a breakout could still attract a lot of buyers that could take us toward the ~$70 target.
Key Levels Over the Next 48-hrs of Trading As of Friday, October 14,2016
T.Y.
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