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Oil Price Fundamental Daily Forecast – Sentiment May Be Getting Ready to Shift to Upside

By:
James Hyerczyk
Published: Nov 16, 2018, 08:36 UTC

Both WTI and Brent crude oil have hit potential support zones on the monthly chart. Additionally, some technical traders have declared the markets oversold. These two factors combined with speculation that OPEC and its allies are considering production cuts are helping to hold the markets in a range.

Crude Oil

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are moving higher early Friday, but remain inside Tuesday’s wide range. The price action suggests a support base is being formed. I haven’t seen any evidence of strong counter-trend buying so I’ll have to chalk up the three day move to light short-covering.

At 0809 GMT, January WTI crude oil futures are trading $57.62, up $0.94 or +1.66% and January Brent crude oil is at $67.76, up $1.14 or +1.71%.

The price action suggests that traders should start preparing for heightened volatility. This means we’re going to enter a headline driven market, if we haven’t entered one already.

We know the market is oversupplied. This is because of rising production in the United States, Saudi Arabia and Russia and weakening global demand. U.S. producers aren’t likely to lighten up. Russia likes the cash flow and says it is comfortable with $70 crude oil. The Saudi’s seem to be the most receptive to production cuts.

According to reports, prices are being underpinned by expectations OPEC would start withholding supply soon. They seem to be operating under the fear of a price collapse similar to the crash of 2014.

According to Reuters, OPEC’s de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5 percent of global supply.

U.S. Energy Information Administration (EIA) Weekly Inventories Report

On Thursday, the EIA reported that domestic crude supplies rose for an eighth straight week, rising 10.3 million barrels during the week-ending November 9. Traders were looking for a rise of 2.3 million barrels. The figure was also higher than the American Petroleum Institute’s estimate of 8.8 million barrels.

Gasoline stockpiles declined by 1.4 million barrels last week, while distillate stockpiles fell by 3.6 million barrels. Traders were expecting an 894,000 barrel decline in gasoline and a 2.7 million barrel draw for distillates.

Forecast

Both WTI and Brent crude oil have hit potential support zones on the monthly chart. Additionally, some technical traders have declared the markets oversold. These two factors combined with speculation that OPEC and its allies are considering production cuts are helping to hold the markets in a range.

The support zone for WTI is $58.95 to $54.79. Brent’s support zone is $67.53 to $63.11. The direction of the next move in crude oil is likely to be determined by trader reaction to these zones. The chart pattern also suggests the next move is likely to be headline driven.

For January WTI crude oil, look for a bullish tone to develop on a sustained move over $58.95 and for the bearish tone to resume on a move through $54.79. For January Brent crude oil, look for an upside bias on a sustained move over $67.53 and for a downside bias on a sustained move under $63.11.

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.

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