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Crude Oil Price Forecast: Downside Stalls on OPEC Favoring Extension

Crude Oil Price Forecast: Downside Stalls on OPEC Favoring Extension

2017-04-20 21:00:00
Tyler Yell, CMT, Currency Strategist
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Want To See What The Pros Expect Of Oil In Q2? Access The Q2 Market ForecastsHERE

Talking Points:

  • Crude Oil Technical Strategy: Long above Q2 Opening Range @ $49.91/bbl
  • Libya reopens El-Feel Oil Field in West Libya, Returning unneeded Oil Supply to market
  • Saudi Arabia's oil minister remarks on likely renewal of the OPEC supply curb

While OPEC may be winning in their battle to balance the global Oil market, it is not necessarily happening on the timeframe they would prefer. Naturally, it is not helpful that Shale production is at its highest levels since 2015. The U.S. Shale resurgence coupled with OPEC’s supply management continues to provide hope for Oil bulls. While Crude dropped ~3% on Wednesday, there is also likely to be volatility on expiration-position squaring is occurring as May WTI contract expires Thursday.

The weekly chart below of the May contract shows key support in the $50.38-$49.59 zone. $50.38 is the 50% retracement of the March range, $49.91 is the April Opening Range low, and $49.59 is the 61.8% retracement of the May range.

Should these levels fail to hold up the price, traders will likely turn their attention to the Trendline drawn off the August 2016 low near $47.90, which held support well in March. This Trendline aligns well with the 55-WMA (blue line on the chart.) The sentiment picture is aligning with the downside view as will be explained below.

The resistance that would turn the focus away from further downside is the April 12 high of $53.74/bbl.

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Crude Oil Price Forecast: Downside Stalls on OPEC Favoring Extension

Chart Created by Tyler Yell, CMT

Crude Oil Sentiment:

Crude Oil Price Forecast: Downside Stalls on OPEC Favoring Extension

Oil - US Crude: As of April 20, retail trader data shows 54.4% of traders are net-long with the ratio of traders long to short at 1.2 to 1. The number of traders net-long is 40.0% higher than yesterday and 15.3% higher from last week, while the number of traders net-short is 30.1% lower than yesterday and 31.7% lower 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 further net-long than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger Oil - US Crude-bearish contrarian trading bias.

(Emphasis Mine)

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Shorter-Term US OIL Technical Levels: Thursday, April 20, 2017

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.

Crude Oil Price Forecast: Downside Stalls on OPEC Favoring Extension

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

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