Advertisement
Advertisement

Oil Fundamental Forecast – April 25, 2017

By:
James Hyerczyk
Updated: Apr 25, 2017, 06:14 UTC

Growing U.S. production and other signs of global oversupply are likely to keep a lid and perhaps downside pressure on U.S. West Texas Intermediate and

Crude Oil

Growing U.S. production and other signs of global oversupply are likely to keep a lid and perhaps downside pressure on U.S. West Texas Intermediate and internationally-favored Brent crude oil over the near-term, but today, technical favors could support the market or even trigger a short-covering rally.

Most technical oscillators and indicators strongly suggest that crude oil has reached oversold levels that may trigger profit-taking, which could lead to the start of a 2 to 3 day short-covering rally.

Current issues for traders are growing U.S. production and gasoline stockpiles. Additionally, hedge fund and commodity fund managers continued to maintain record bullish positions on oil. They are probably betting that the OPEC-led plan to cut production will eventually drain the stockpiles. However, the inability to draw down U.S. stockpiles and worries over increasing U.S. production will eventually force these investors out of their positions. This excessive selling will then be the catalyst for the next major move to the downside.

Brent Crude
Daily July Brent Crude

Momentum is trending down, however, we’re not sure if investors are going to keep selling at low levels or wait for a short-term correction in the immediate trend. Today is the seventh day down from the recent top so we may be ripe for a counter-trend move. However, we are confident that the selling pressure will continue to build.

Helping to fuel this outlook is another increase in the number of producing oil rigs and expectations of increasing U.S. production. We’ll know more about this from today’s American Petroleum Institute’s report and Wednesday’s inventories report from the U.S. Energy Information Administration.

WTI Crude Oil
Daily June West Texas Intermediate Crude Oil

Traders do expect OPEC and other major non-OPEC members to extend the program to cut production, however, they are sure if this will be enough to sufficiently cut into global supplies.

We’re bearish crude oil, but we also know that technically the market is oversold. Our choice over the next few days will be whether to sell weakness or wait for a short-term correction to short.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?

Advertisement