Crude Oil Price Forecast Talking Points:
- The ONE Thing: Positioning in Brent futures has fallen by ~40% from 2018 peak, but could see rebound that helps price remain near recent highs or potentially push beyond. Uncertainty remains surrounding the OPEC and Russia decision at the June 22 meeting on whether to raise production at the June 22-23 meeting in Vienna, but the positioning backdrop could favor limited downside.
- WTI Crude Oil Technical Analysis Strategy: Crude has fallen deeply after losing nearly 12% from the May peak. Traders will appropriately look to the June 1 high of $67.27. A break higher in the front-month contract could be an indicator of another run toward the low-$70s for WTI. A break below the June 4 low of $64.18 would argue that positioning is set to contract further and helpt he price test the $58/60 zone.
- Access our recent Crude Oil & Macro Fundamental Forecast here
Key Chart Levels For WTI Crude Oil:
- Resistance: $67.24-68.61 per barrel – June opening range high, corrective high from May 30
- Spot: $66.14/bbl
- Support: $64.18 – June opening range low, lagging line Ichimoku cloud support
Crude Oil Market Update
Monday saw posiitive price action in crude oil on news of a disruption of oil getting to export desitinations in Nigeria, but the long-term trend will likely be dependent on what happens in the coming weeks.
Bearish developments in the form of OPEC and Russia relenting on their production curbs have hit the market over recent weeks. However, while the market has focused on Russia and Saudi set to discuss a boost in production, Iran and Venezuela are calling foul.
Recently, Iraq said that OPEC should resist urges to raise the global supplies of oil that would limit the price gains we’ve seen. Specifically, the supply curbs have shown up clearly via the futures curve where near-dated contracts were priced at a steep premium to longer-dated contracts on a perceived shortage. Despite the futures premium, Iraq, the second largest OPEC producer has argued that OPEC has not fully reached its stated goal.
June 22 is when OPEC and Russia will meet in Vienna to discuss where the state of the current campaign to curb production is heading. Based on recent news that Saudi has recently lifted production to the most since October, they may be already be setting the set to roll-back the production curbs. However, any signs that Saudi has shifted to favor the view of Iraq, Iran, & Venezuela to keep production curbs in play, there could be a sharp shift back into long positions that may lift prices further yet.
Positioning May Favor Further Crude Gains
Data source: CFTC, Bloomberg
The chart above should give hope to the bulls. In short, it shows that despite a reduction of long Brent futures positions by institutions by nearly 40%, Brent has only fallen ~8%.
At the same time, inflation measures seem to be holding firm, and a late-cycle global economy tends to be the environment where crude tends to outperform.
The drop in longs has come as the fears of new production from OPEC mega-producers align with jumps in US petroleum stockpiles that have resulted in a flattening of the WTI crude curve indicating tightness in the physical market is evaporating.
However, any positive fundamental surprise that brings back signs of tightness whether via demand or supply could show that higher crude prices appear sticky and fighting the uptrend may be a more difficult way to profit in this commodity when you could be joining the trend.
Daily NYMEX WTI –Unwind has reached identified support, next move important
Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT
Internal trendlines can be helpful in allowing traders to see support for a broader trend. The trendlineis drawn o the chart above shows crude bouncing off higher lows on a slope drawn from the Andrew’s Pitchfork channel.
Additionally, the price has found support via the daily Ichimoku cloud. While the price has pierced below the cloud, traders have found that bounces from breakdowns have developed around the cloud.
Should a bounce develop, traders should look to the highs of May 30 and June 1 at $67.24-68.61 per barrel. A break and close above there would indicator another run higher. However, a breakdown below the June 4 low of $64.17 would also take price below the internal trendline and favor a broader behavioral shift toward bearishness is at play.
Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2
Recommended Reading: 4 Effective Trading Indicators Every Trader Should Know
More for You:
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---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 trading educational resources. Read more of Tyler’s Technical reports via his bio page.
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