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Crude Oil Price Forecast: A Leg Higher On Shrinking US Stockpiles

Crude Oil Price Forecast: A Leg Higher On Shrinking US Stockpiles

Tyler Yell, CMT, Currency Strategist

Crude Oil Price Forecast Talking Points:

  • WTI Crude Oil Technical Analysis Strategy: Bullish continuation anticipated in a volatile environment
  • A small increase in US production is little match for across the board drawdown in crude, gasoline, and distillates.
  • Trader Sentiment Highlight from IG UK: retail short positions favors further advances

OPEC and the United States seem to be sending Bullish signals to the Crude Oil market. OPEC and Russia appear to be setting the stage to keep oil cuts going despite a vanishing glut that caused them to engage the production curbs in the first place.

Second, shrinking US Oil stockpiles are showing a tighter physical market per the EIA report on Wednesday that puts pressure on physical buyers to buy now and hold as the benefits of carrying the physical exceed the costs as evidenced by backwardation.

These developments have led to Crude futures surging nearly 3% in New York with the price pushing closer to the $70/bbl mark for WTI and $75/bbl on Brent for June settlement. For the former, there remains a confluence of technical resistance from Fibonacci levels near the $70/bbl mark that could be seen as a place for buyers to take profits should the fundamental data develop fault lines.

Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2

US Oil Exports Remain Elevated and Keep Oil Bulls Humming

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Data source: Bloomberg, DoE

The chart above helps visualize the sharp rebound in US crude exports to nearly 1.8 million bpd that helps traders see how over-compliance by the OPEC+ constituents on the agreed upon production curb alongside Venezuela’s production collapse is paving the road for tighter markets and higher prices.

Technical Focus Looks to Price > Ichimoku Cloud, Fibonacci Targets

Crude oil looks set to test a key confluence of Fibonacci levels near the $70/bbl level that combines the 50% retracement of the 2014-2016 price range and the 100% Fibonacci extension of the 2016/2017 extremes drawn off the 2017 low of $42.07/bbl.

Given the fundamental view shared above and the continued market support from OPEC+, it’s hard to be long-term or medium-term bearish crude oil with a straight face with price trading above the Ichimoku cloud as the lagging line is also above price from 26-periods ago.

Want a full (& FREE) guide to walk you through Ichimoku? I created one here (click Advanced Guides)

Chart Watch:WTI Crude Price Continues To Push $70/bbl

Please add a description for the image.

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

WTI Crude Oil Insight from IG Client Positioning

Crude Oil Price Forecast: A Leg Higher On Shrinking US Stockpiles

Source: IG CLIENT SENTIMENT data provided by IG

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse lower despite the fact traders remain net-short (emphasis mine.)

---Written by Tyler Yell, CMT

Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as t1rading educational resources. Read more of Tyler’s Technical reports via his bio page.

Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well.

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