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Crude Oil Price Forecast: Demand Drives Oil, But Lower Highs Concern

Crude Oil Price Forecast: Demand Drives Oil, But Lower Highs Concern

Tyler Yell, CMT, Currency Strategist

Crude Oil Price Forecast Talking Points:

  • WTI Crude Oil Technical Analysis Strategy: all eyes on lower-highs and 100-DMA (60.51)
  • Demand appears strong as distillate (gasoline) stocks drop alongside Cushing, OK inventory
  • Trader Sentiment Highlight from IG UK: retail selling increases, favoring signal for upside

Risky assets like commodities that benefit from free-trade and global demand have seemed to hit a wall lately. While selling has not taken over like many feared in early February, a month later, buying doesn’t appear to have taken over either. Oil is a good example.

EIA Crude Oil Inventory Data Prevents Demand Concern, While Trade Wars Promote It

WTI held up before a wave of risk-off selling hit all markets from fixed-income to stocks and even cryptocurrencies with Bitcoin falling back below $10,000. The Inventory data showed the 11th straight decline in Cushing, OK inventory with gasoline inventories also falling.

The Crude Oil Inventory build was not to concerning as it was below expectations at 2m barrels. While production is on the rise, so is demand as evidenced by the inventory drawdowns of Oil products.

Lower Peaks in Crude Oil May Be a Warning

WTI Crude could be working on a bearish pattern with resistance invalidating the short-term bearish view at 63.14, the March 6 high. The pattern in focus is a series of lower highs into the 100-DMA at 60.52/bbl.

A break below the 100-DMA would likely turn focus to $57.32/58, which marks the 38.2% retracement of the June-January range and pivot in early February.

Because demand is rising faster than production, the focus turns to ‘Trade War’ talk and whether demand begins to fall. If that fails to surface, and Crude Oil price remains supported by the 60.52-57.23/bbl zone then upside risk will remain in focus over downside risk.

Unlock our Q1 18 forecast to learn what will drive trends for Crude Oil at the open of 2018.

Chart Watch: Crude Price Comes Down To 100-DMA at 60.52, Break Would Favor Bears in Short-Term

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

WTI Crude Oil Insight from IG Client Positioning

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We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may reverse higher.

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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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