Crude Oil Price Forecast Talking Points:
- The ONE Thing: Demand dynamics and supply shocks help to keep oil supported. While volatility appears set for a higher average than 2017, which is not saying much as it had the lowest realized cross-asset volatility in multiple decades there appears to be no room for gold to test crude’s dominance of the market. Metals remain mixed as higher rates keep traders away from the non-yielding yellow metal while backwardation continues to support crude. Even base metals are losing their flavor on slowing demand growth in China.
- Last week, President Trump ordered the reinstatement of Iran sanctions: While crude outsiders may see that as the key bullish driver, the demand dynamics remain in the driver seat as supply shocks may continue to arise and help take crude toward bullish targets of $77/bbl, which marks the 61.8% retracement of the 2014/2016 range.
- OPEC raises their 2018 demand forecast helping to show the physical market may tighten further.
- WTI Crude Oil Technical Analysis Strategy: New technical support will be firm at Tuesday’s low of $67.63/bbl. Selling above this level is an ego call that seeks to say when momentum will turn in favor of one’s preconceived notions that the market is “overbought.”
- Access our recent Crude Oil Fundamental Forecast here
WTI crude oil is opening week in the green with front–month contracts of WTI & Brent trading at $70.95/bbl & $77.87/bbl respectively. Over the weekend, Saudi came out to calm markets by saying their capacity would easily make up anything “lost” by newly imposes Iranian sanctions on Trump’s exit from the Iran accord. However, the positive price action is being credited to OPEC’s recently released Monthly Oil Market Report where they lifted (again) their demand estimates.
Futures Positioning Insights From CFTC CoT
Last week’s CFTC Commitment of Traders report that came out before Trump announced he was leaving the Iranian Accord and imposing sanctions on OPEC’s third largest producer showed that investors have recently pared their bullish bets with Brent net longs cut by -22,009 contracts to 569,448 while WTI decreased some -7,439 contracts to 410,608.
CoT Data Shows Crude Bulls At 71% of 52-Week Range
Article Source: CoT: USD/CHF Bearish on Swiss Franc Position Changes, Technicals
Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2
Technical Analysis – WTI Crude Oil Stays In Bullish Standing > $67.56/BBL
Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT
Markets are said to take the stairs higher and the elevator lower. The chart above shows both dynamics as it captures the massive drop in 2014 that mirrored the 2008/2009 drop toward lower levels and the recent rise from the January 2016 low.
When a trend is as strong as we see in crude, it’s often best to sit back and ask, at what level of support would a break below change my bullish view?
On the prompt WTI contract, that would be the January high at $66.58 to the low last week’s low at $67.56. Absent a break below this zone, it’s hard to say a top is in as momentum tends to lead price in markets, and crude is no exception.
Recommended Reading: 4 Effective Trading Indicators Every Trader Should Know
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—Written by Tyler Yell, CMT
Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as trading educational resources. Read more of Tyler’s Technical reports via his bio page.
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