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Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC Hopes

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC Hopes

2017-03-30 18:30:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

In a divorce from typical correlations, both US Dollar via the DXY and Crude Oil have found life at the end of Q1 17. Month end flows tend to be erratic, and thus, the broader multi-week trend should take preference over the multi-day move. However, the overall correlation of DXY & USOIL has dropped to a level of near meaningless with a 20-day correlation as of March 30 of -.138.

In addition to the erratic end of month order flow, it’s worth keeping an eye on the headlines for Crude Oil, which have recently touted initial support from OPEC members to extend the cut. The Production, which reached agreement in late November is scheduled to expire in June, but the option to extend the cuts were seen as a possibility if such action would help secure a balancing in the Oil. Given the large rise in Shale production in the US, which has seen a doubling of active Oil rigs since the May 2015 low per Baker Hughes International, a production cut extension from OPEC and likely Russia, could go a long way in putting a higher price floor under Oil.

CRUDE OIL – Technical Analysis: Whether or not Crude Oil is correcting a downtrend or beginning a new rise to 2017 highs is the key questions. The price is at a key juncture whereas a corrective move higher, that would favor new lows would favor price resistance near $52/bbl. Specifically, $51.97 is the 61.8% retracement of the late-February to March range. A turnaround lower below or near $52 that subsequently breaks below $47 would open up a move to the $40-44 zone we’ve long watched as likely support in a more significant downturn.

However, absent the risk of a turnaround lower in Crude, traders should watch for a clean break higher to nullify the view that we’ll see an extension lower. Traders would do well to watch a break above $52 as an argument that Crude may have put in another higher price floor near the 200-DMA ($48.63/bbl.).

Are commodity prices matching DailyFX forecasts so far in 2017? Find out here!

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC Hopes

Chart created using TradingView

The price action in late March has looked like consolidation, but one concern worth mentioning is the strong bounce in RSI(5). The bounce in RSI(5) looks corrective, which favors a trend continuation move lower and possibly to the $44/40 zone in the coming weeks if further weakness surfaces.

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Crude Sentiment Shows Retail Bulls Adding To Longs In Hope Of A Bullish Reversal

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC Hopes

IG Retail trader data shows 65.1% of traders are net-long with the ratio of traders long to short at 1.87 to 1. In fact, traders have remained net-long since Mar 01 when Oil - US Crude traded near 5433.1; theprice has moved 7.2% lower since then. The number of traders net-long is 12.0% lower than yesterday and 9.5% lower from last week, while the number of traders net-short is 23.2% higher than yesterday and 7.3% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests Oil - US Crude prices may continue to fall. Traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse higher despite the fact traders remain net-long. (Emphasis Mine)

--- Written by Tyler Yell, CMT, Currency Analyst & Trading Instructor for DailyFX.com

Key LevelsOver the Next 48-hrs of Trading as ofThursday, March 30, 2017

Crude Oil Price Forecast: Oil Has Best Week In 2017 On OPEC Hopes

For those interested in shorter-term levels of focus than the ones above, these levels signal important potential pivot levels over the next 48-hours of trading.

Contact and follow Tyler on Twitter: @ForexYell

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

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