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Crude Oil Forecast And Technical Analysis: How far could it drop?

Crude Oil Forecast And Technical Analysis: How far could it drop?

Reuters: Oil prices slipped on Friday, extending a steep fall from the previous session on surging U.S. output and an expected supply increase from producer club OPEC and putting crude on track for the second week of declines.

The question? Has oil peaked already?

We started to sell Crude Oil at 66.30. The price dropped 500 pips already. What is next?

Supply Side of The Story:

It is obvious that the Saudi side wants to drive prices higher to balance the budget and support the Aramco IPO.

The threat to global oil supplies from Iran and Venezuela is another component.

Rising U.S inventories add weights on the prices.

On the supply side, the most important issue is the Iran Sanctions which could send the prices higher near term. The Iran story has significant second-degree implications that the market may not have fully got to grips with. The exemptions that allowed many countries to buy Iranian oil have expired, so they’ll need to look somewhere else if they’re not doing so already. Iranian exports may fall by half from about 1.25 million b/d currently. To be clear, the concern was not so much about the ability of OPEC++ to plug the void, even in the unlikely scenario that Iranian exports fell to zero. The concern is what happens after they do. Assuming the market gets an additional 600,000-700,000 b/d from within OPEC++, the group’s spare capacity drops to historically low levels of 1.5 percent of demand.

Demand Side of the Story:

Both the IMF and WTO reduce their Global Growth forecasts. Although the Baltic Dry Index is showing the signal of recovery, it is still below the average.

The BAltic Dry Index

 

Technically :

Crude Oil prices broke the key structural support at 62.50. Selling pressure remains as long as the prices stay below 62.50.

Yesterday I have closed 70%  of our short positions. Even as we discussed in the trading room, some members took long trades targeting 61.72.

We have 3 key levels near term

Upside resistance: 62.50

Pivot: 61.72

Support: 60.94

Break below 60.94 will send the prices 60.16 and 59ç38 which is the ultimate target of the pattern.

We plan to sell potential pullbacks towards 62.50. Daily closing above 62.50 would change the near term picture from bearish to bullish.

Entry notification will be sent to members.

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CRUDE OIL: Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these securities. You should do your own thorough research before making any investment decisions. Chartreaderpro does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Forex involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility

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