Crude Oil forecast for the week of October 17, 2016, Technical Analysis

WTI Crude Oil

The WTI Crude Oil market initially tried to rally during the course of the week but found the $52 level to be exhaustive yet again. Because of this, we did up forming a bit of a shooting star and it does suggest that we are going to pull back from here, if not fall significantly. After all, the $52 level has been very resistive, and with that being the case I feel that the market will pull back to the $44 level below, and that’s about it. I think that given enough time, the market will find itself a little overbought, at least for the next few weeks. Although there are OPEC production cuts coming, the reality is that as long as oil gets more and more expensive, more and more US producers will get involved. Because of this, oil can only rally so far in this move makes quite a bit of sense.

 

Brent

Brent markets of course are influenced by the exact same forces that the WTI Crude Oil markets. So having said that, it makes sense that a break down below the bottom of the shooting star should send this market looking for lower levels, perhaps somewhere near the $45 handle. Ultimately, I think that this market will have to deal with the fact that sooner or later oversupply becomes an issue yet again. True, in the short-term we could see a bit of OPEC solidarity, but let’s be honest here, OPEC doesn’t exactly have a long history of working together. Quite often, countries will produce more than expected, and that of course works against the value of oil as we oversupply yet again.

Speaking of the cuts, they are not large enough to take out the 2 million barrels a day by themselves. While Russia looks likely to help, at the end of the day that is only going to be a minor help, because the Americans will start drilling at higher levels, and then shale will come next. In other words, this rally won’t have any real legs.

 Oil Weekly Fundamental Forecast