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Discussion points on crude oil price forecasts:
- the A Thing: Volatility continues to decline in the crude oil market and traders who view the charts may continue to favor higher prices as the overall stability of risk sentiment seems to pave the way for a test of 59 to 64 USD / bbl. Traders will also turn to 21-DMA at $ 56.62 / bbl to support bullish sentiment.
- What is the risk for the bullish view? Offer more than the demand. This week, OPEC has challenged current US legislation on the possibility of prosecuting OPEC, which could lead to a disastrous situation for the United States.
- What is the point of view of a professional gross trader? This the podcast with Brynne Kelly is a view not to be missed on oil trading from the platform of the world's largest merchants
You're in luck, DailyFX crude oil forecast for the first quarter of 2019 has just been released
Technical forecasts for USOIL: Bullish
Source: Bloomberg
Volatility is an excellent servant, but a horrible master. When volatility gets out of control, it governs everything and, of course, few traders are immune to anger, aggressive declines can be followed by the most aggressive rallies. However, when volatility is low, everything seems to be going well in the world of traders, and this is similar to the current situation.
Of course, there is much to write about the China-China trade war, the central bank's move to transparency, and the OPEC and their alliances, collectively known as OPEC +, which will meet in Azerbaijan, Algeria, to discuss how they can make up for the crisis. The Venezuelan offer shocks and continues to stabilize the market.
All this and more are gathered in the table above. The price of the WTI Crude Oil first month oil contract and the implied volatility of 3M (a price derived from the Black-Sholes option pricing model) on crude oil indicates a clear inverse relationship. As volatility increases, the price generally declines or fluctuates without directional or fundamental indications, but is subject to flow and position adjustments.
When volatility is low and the implied volume over three months is as low today as at the end of October, traders continue to ease their fears. Much of this optimism is due to the prospect of a reduction in supply, and traders are placing the highest premium on the December 2019 contract versus the December 2020 WTI contract since November. .
Looking for a fundamental perspective on crude oil? CheckWeekly Fundamental Forecast of Crude Oil.
A decline may appear, but history shows that the situation could remain
Graphic source: ProRealTime mapping, IG UK Price Feed. Ccreated by Tyler Yell, CMT
The chart above is much simpler than the usual charts I share. However, the message to be transmitted is simple. After exceeding the volatility range below the 20-period moving average, the best crude days are yet to come.
However, a decline has occurred over the past three years, when such development occurred when the price is above 20 MA after pushing the lower lower band. Subsequently, the 20-MA on the weekly chart at $ 53.79 / bbl could provide a solid form of support or purchasing power on any subsequent withdrawal. Only a break below and a trading default above 20 MAs on the weekly chart would change the bullish view to neutral.
Finally, the upper volatility range (2.20) on weekly map sites is $ 62.59 / bbl. Traders may be fairly encouraged in this area, but if we look at price movements in the past, they will find that the price has risen in the upper volatility range after first contact. , which could result in price movement towards the 11-year trend line of close to $ 71 / bbl if the above conditions are met.
Could they? Would they? US antitrust rules could break global oil
A familiar tactic of the current administration has reached an unknown target. Trump's longstanding criticism of OPEC intensifies, as US lawmakers attempt to allow states to sue OPEC countries to control their overabundance of power, and thus their price .
The bill has received the nickname of NOPEC, as in the Oil and Gas Export Cartel Act, and would allow the US Department of Justice to sue for violating antitrust laws for exercising its power. to control the production of oil in order to affect crude prices.
Traders may recall a similar bill, which would be an amendment to Sherman's antitrust law of 1890, whereby Exxon, Shell and other John D. Rockefeller's Standard Oil derivatives adopted by both Parliament and Congress before President George W vetoed it. Bush in 2007. Trump, however, can understand the benefit he could give him, but OPEC is warning against the unintended consequences that should cause shivers in the back of anyone related to the oil industry.
While Trump is likely considering lowering energy costs for the consumer, OPEC is focusing on total destruction that could affect the flooded market to unprecedented proportions. OPEC Secretary General Mohammed Barkindo pointed out that such legislation would not serve the interests of the United States. Barkindo warned Wall Street financiers per Bloomberg that if the law came into force, not all countries would unite and produce as much as possible, as soon as possible, and that oil would become as cheap as possible.
Why is this a potential problem of the United States? The global extraction costs are much lower than those of shale and not only put them in a potentially unprofitable situation, but financiers should also be concerned. The billions of billions of loans granted for extraction and energy production based in the United States would likely result in high defaults that could be significantly reduced if the market becomes free for all.
We will see.
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— Written by Tyler Yell, CMT
Tyler Yell is a Certified Market Technician. Tyler provides technical badysis based on fundamental factors in key markets as well as educational resources. Learn more about Tyler's technical reports via its bio page.
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