Advertisement
Advertisement

Crude Oil Price Analysis for October 4, 2017

By:
David Becker
Published: Oct 3, 2017, 18:05 UTC

Crude oil prices moved lower on Tuesday but rebounded from the session lows ahead of Tuesday’s evenings inventory report scheduled to be released by the

Crude Oil

Crude oil prices moved lower on Tuesday but rebounded from the session lows ahead of Tuesday’s evenings inventory report scheduled to be released by the American Petroleum Institute.  On Wednesday the Department of Energy will release its estimate of current inventory levels as well as weekly demand. Traders attempted to square up positions ahead of the numbers.

technicals

Crude oil prices dipped early but rebounded later in the day ahead of the API inventory numbers.  Prices pushed through support levels and then moved back to an upward sloping trend line that comes in near 50.90.  A break back above the upward sloping trend line would lead to a test of the 10-day moving average near 51.21. Support is seen near the August lows at 47.00. Prices were unable to convincingly pierce through the 52 handle, and the failure pushed prices lower.

Momentum on crude oil prices has turned negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses below the 9-day exponential moving average of the spread. The MACD signal line move from positive to negative territory confirming the crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices. The relative strength index (RSI) which is a momentum oscillator that measures accelerating and decelerating momentum, moved lower with price action reflecting accelerating negative momentum. The current reading of the RSI is 54, which is in the middle of the neutral range and reflects consolidation.

cl-100317a

OPEC Minister are Expected to Discuss Production

OPEC ministers will discuss this week the progress of the production cut deal and a mechanism to monitor crude oil exports, on the sidelines of an energy forum in St. Petersburg, according to Russian Energy Minister Alexander Novak. The minister said, “We will discuss the state of the market and the current situation regarding monitoring and execution of the crude production deal with our colleagues at the Russian Energy Week,”. Novak went on to say, “At the latest meeting we agreed to monitor oil exports. This is a new instrument, which has not been clearly formed yet, which is why I think it will be one of the main issues on the discussion agenda from the viewpoint of export control mechanism,”

Before the latest meeting on September 22, reports emerged that the OPEC/non-OPEC joint panel tasked with monitoring the cuts, which consists of OPEC’s Kuwait, Venezuela, and Algeria, as well as non-OPEC Russia and Oman, was expected to discuss a proposal to consider informal monitoring of crude oil exports, in addition to supervising compliance to production cuts.

Although it’s not an official OPEC meeting, the talks and discussions on the sidelines of the Russian forum this week will be another opportunity for OPEC members and Russia to share views and news ahead of the official OPEC summit in November. Although almost all ministers have said that it’s too early to decide on a possible extension of the production cuts, OPEC and friends are keeping “all options open” for speeding up the rebalancing of the oil market.

The Dollar Remains Solid

The dollar continues to remain robust, which is keeping a cap on crude oil prices. Stronger than expected same store sales kept the dollar buoyed. In addition, the RBA kept rates unchanged which was in line with expectations.

The RBA has kept rates steady at their historical low of 1.5%, as widely expected, while offering little to encourage talk the central bank will hike in 2018. Reserve Bank governor Philip Lowe continued to strike an upbeat tone on the state of the local economy, but warned that wage growth and inflation are likely to stay “low” for “a while yet”.

U.S. chain store sales soared 4.7% in the week ended September 30, according to The Retail Economist, rebounding from a 1.3% decline previously. The annual pace of sales climbed to a 1.6% year over year rate versus 0.5% year over year. Furniture store sales paced the rally, reflecting a strong housing market, said the report, along with consumers’ willingness to spend on discretionary items.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement