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Crude Oil Price Strengthens on Geopolitical Risk, Positioning

Crude Oil Price Strengthens on Geopolitical Risk, Positioning

2017-10-16 16:30:00
Tyler Yell, CMT, Currency Strategist
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Talking Points:

  • WTI Crude Oil Technical Strategy: Buying Dips Above
  • Crude Oil may approach 100% Fib extension at $53.94/bbl
  • Sentiment Highlight: positioning continues to favor a broadly bullish bias in the near term

The price of WTI Crude Oil has mounted a strong recovery after testing the polarity point on the chart between $49/51 per barrel. A polarity point is where prior resistance may act as future support. Oil traders should look to see if the price can continue to find support near the $50/bbl figure. Since summer, the dominant trend bias favors price appreciation. Near-term positioning per IGCScontinues to be defined by a series of lower highs and lows of net-long positions, which may pave the way for new longs to enter the market and chase price higher (at least for now).

Geopolitical tensions have arisen while many Intermarket correlations have broken down for Crude Oil. The geopolitical tensions are focused on US President, Donald Trump and the Iraq-Kurdistan tensions. The former may threaten to block a portion of exports from OPEC’s third largest producer while the latter brings concerns of disrupted flow as Chinese demand is at near-record levels. Both components are leading to buying pressure in the energy market.

From current pricing, a hold of a daily close above the $50.18 figure (Oct. 12 low) opens the door for a challenge of $52.83-53.94/bbl (September high, 100% Fib extension). Alternatively, a reversal and close back below $50.18 exposes $49.13 (October low, trend line pivot).

Unlock our Q4 forecast to learn what will drive trends for Crude Oil through year-end!

Crude Oil Price Strengthens on Geopolitical Risk, Positioning

Chart created by Tyler Yell, CMT. Tweet @ForexYell for comments, questions

WTI Crude Oil Insight from IG Client Positioning:positioning continues to favor a broadly bullish bias in the near term

The sentiment highlight section is designed to help you see how DailyFX utilizes the insights derived from IG Client Sentiment, and how client positioning can lead to trade ideas. If you have any questions on this indicator, you are welcome to reach out to the author of this article with questions at tyell@dailyfx.com.

Crude Oil Price Strengthens on Geopolitical Risk, Positioning

Oil - US Crude: Retail trader data shows 50.9% of traders are net-long with the ratio of traders long to short at 1.04 to 1. The number of traders net-long is 4.4% higher than yesterday and 15.4% lower from last week, while the number of traders net-short is 10.1% higher than yesterday and 21.0% 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. Yet 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 added.)

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

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Contact and discuss markets with Tyler on Twitter: @ForexYell

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

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