Crude Oil Forecast: How deep Oil Prices may fall?
We have started to sell Crude Oil at 65 $ and reached our target at 52.80 $.
What is next?
What were the reasons for the sell-off ? What is driving the market?
- The supply and demand balance strongly indicates that oversupply will last for some time to come.
- Global Growth concerns. I have mentioned several times that WTO and IMF reduced their global growth projections. Parallel to this, both IEA, WTO and OPEC lowered their global oil demand estimates.I have shared the Baltic Dry Index chart indicating the lower global economic activity.
- Trade Wars. As I mentioned a week ago, if the trade continues to collapse between the U.S./China while EU elections cause the consumers to “pause” traditional spending habits, it would suggest that we could see a continued breakdown in general commodity levels over the next 6-12+ months.
- OPEC+ supply cut, Venezuela and Iran Sanctions did not help Crude Oil prices to enter into a bullish market. ( Closing above 68 $ ). Note the sanction waivers.
- Now Crude Oil prices have reached a critical level. We have to scenarios ahead. OPEC is to maintain cuts or face a world of much lower crude prices ( Then comes a war between OPEC and US Drilling Companies with 42 $ production cost).OPEC postponed their meeting for the supply decision. OPEC may wait for “right on time” action. ( 40 $ – 45 $ per barrel )
- Within the United States, we are seeing inventories aggressively climb above the five-year average in a push which has gathered steam over the last few weeks. What is particularly troubling about the build in stocks is that it comes during a period of time in which inventories typically begin drawing due to the beginning of summer driving season which comes in late May. While the market remains in a state of oversupply, the price of crude oil is likely to continue falling. Demand is going to be lower for longer. Specifically, regional cracks were high across the country for the past several weeks and U.S. refineries didn’t supply the market with product. Instead, gasoline stocks were replenished through imports and product stocks are now at the five-year average once again.
- Brent/ WTI spread may widen intermediate term.
As a conclusion:
As I have been writing for three months, Crude oil is fundamentally and technically bearish. Supply is surpassing demand and stocks are rising at a time when they should be falling.
Please pay attention to The US Commodity Index. The double top pattern’s completed and the pattern suggests further fall.
As seen on the weekly chart, Crude Oil ended the week at 53 $ SMA 200 support. Closings below 53 $ would accelerate the sell-off. 51.50 and 50.00 would be the first two target level.
Potential Golden Cut of MAs indicates a bearish move intermediate term.
A Bullish Bat Pattern and oversold RSI indicate a technical correction towards 57 $ near term. Potential pullbacks can be used as a selling opportunity.
On the downside 51.50 ( Fibonacci 61.8% of the latest bullish move ) and 50.00 $ (psychological level) will be our main focus.
On the upside, 56.25, 58.10 are the potential pullback levels to be used for selling opportunity.
We will update and share the intraday trading opportunity for the members.
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