For the everyday investor and trader committed to growth
  • Home
  • Contact

Crush The Market

Crude Oil Set To Break 13 Month Bull Rally As Supply Continues To Rise

3/27/2017

0 Comments

 
Crude Oil Under Pressure From Rising US Production

Crude Oil is about to break its 13 month uptrend as rising US crude production is starting to break down the price of Crude Oil. This is despite OPEC announcing a supply cut some months ago to help stabilize the price of Crude Oil. 

If you take a look at the chart below of US  Crude production and Oil Rig count within the US, they both seemed to level out around September / October 2016 just as the last leg of the downtrend  of Crude Oil was playing out. Since making the lows late last year the rig count has been steadily rising with production levels rising along side the rig count albeit on a 1 - 2 month lag.
US Crude production & Oil rig count
Click chart for source: Zerohedge.com
Record US Crude Production Leads To Record Glut

Since US crude oil production has been soaring for several months now, inventories have also been rising along with rising production. Compounding the issue is the US economy which has been slowing for close to two years now. Now the decline in the US economy is accelerating consumption demand for gasoline within the US is also falling. Hence you will notice on the chart below on the right the sudden spike higher in inventories. 
US crude inventories
Click chart for source: Zerohedge.com

Crude Oil Monthly Chart Review

Since making multi year lows back in February 2016 touching USD $26.14 a barrel, Crude Oil had been steadily climbing for around 13 months. After closing above its downtrend line back in April 2016, Crude continued to march higher for the remainder of 2016 and into early 2017. With just 1 trading week left in the month of March, unless there is a major reversal this week Crude Oil is set to close below its 13 month uptrend with a large red candle.

Crude Oil Heading Towards $41.50 Target

Based on the current outlook of the Monthly chart with a clear break of the uptrend currently occurring for Crude Oil, the next level of support on a monthly chart is around the $41.50 - 60 level which is another $6.50 - $6.60 or 13.75% lower from the current price.

Looking at the momentum indicators below, they are both supporting the current weakness in the price, as Momentum even though is still positive is heading back towards zero. The stochastic momentum indicator is also showing that based on the current price of $48 would form a bearish cross. (See circled area within Stochastic indicator) Monthly stochastic indicators are usually more reliable indicator of change of trends as they are much longer time frame and take a long time to form.
US Crude Oil Monthly Chart
Hedge Funds Change Direction As Crude Oil Prices Shifts

Up until as recently as February 2016 Hedge Funds had placed a record amount of long contracts (betting on higher prices) for Crude Oil. Since then Hedge funds have begun to reverse their bullish bets setting a new record for reducing the bets for higher prices. The swift change in sentiment among Hedge Funds and Traders was due to the price falling below the physiological $50 level.

Picture
Click headline for article source: Bloomberg.com
Crude Oil - Weekly Chart Review

Taking a closer look at Crude Oil via the weekly chart you can see that the price tried to break higher numerous times back in January and February this year. However after reaching the the $53.80 - $53.95 level on several occasions the price collapsed a few weeks with a long red candle which I have circled on the chart.

Momentum Falls Below Zero

Momentum is currently sitting at -5.74 on the weekly chart having closed below zero in the first week of March as the bulls became exhausted and finally gave in to lower prices.

The weekly Stochastic momentum indicator has been falling for several weeks now confirming the weakness in price. Since both indicators are supporting the falls in price on the weekly and monthly chart, it suggests that there is a high probability that the weakness in Crude Oil will continue over the medium to long term.

Since Crude Oil has confirmed a close below the weekly uptrend 3 weeks ago, the next level of support on the weekly chart is $40.50 a barrel.

Watch For A Surprise Reversal Above $54

Although very unlikely to occur over the coming weeks, I suggest watching out for a potential reversal in price back to the current resistance level of just below $54 a barrel. There may be another attempt to break above $54 but will unlikely succeed with current oversupply issues facing the market with rising US production.  The reason why I suggest looking at for the reversal is if OPEC announces further cuts to their supply to attempt to stop the falls in price.
US Crude Oil Weekly chart
Thanks for viewing Crush The Market latest article.

Remember to share this with your friends by clicking on the Facebook & Twitter Icon's Below.

Make sure you Subscribe to Crush The Market - Choosing from the 4 options: 

Email - Subscribe at bottom of page.   OR

Facebook, Twitter or RSS Feed on the top right side toolbar for latest posts and market updates.

If you would like to view my most recent macro article on the US economy click the link below:

Rising Rates About To Crack The US Economy Under Record Debt Levels

To view my most recent Stock/s review click the link below:

Russell 2000 Bullish Run Looks Tired As Momentum Falls

Disclaimer: This post is for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
0 Comments



Leave a Reply.

    Tweets by crushthemarket
    Subscribe Below
    Via Social Icons
    Picture
    Picture
    Picture

    Archives

    April 2020
    February 2020
    November 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    December 2018
    August 2018
    January 2018
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016

    Categories

    All
    AUS Economy
    AUS Stocks
    China Economy
    Commodities
    ECB
    EU
    EU Companies
    FED
    Forex
    Investing
    Markets
    Pension Funds
    Property
    Superannuation
    Technology
    Trading
    US Economy
    US Stocks

    Author

    I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.

Proudly powered by Weebly
Photo used under Creative Commons from okchomeseller
  • Home
  • Contact