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Following the OPEC meeting last week, WTI crude oil futures exploded. Traders anticipate that increased production from the cartel will not be enough to affect supply problems in the short term. In addition, talking about Iranian sanctions is pinching global stocks. I could continue to discuss estimates of aggregate use statistics, the likelihood that OPEC quotas will be respected, and so on. However, I prefer to let the graphs talk about it
Daily Crude Oil Chart
Source: QST [19659004] Towards the end of last week, oil prices fell towards the support of the trend line. The bull market however survived, and prices rallied sharply in the low $ 60.00. However, before assuming that the oil is heading towards the Moon, let's take a step back to look at the map. We are already approaching the opposite scenario, a reversal of a lower potential trend line, as we move towards next week.
Trend channels often dilate with age; This is probably due to the fact that traders are likely to place stop losses above the previous high and that markets tend to crowd out weak traders with stop-loss before reversing the trend. As a result, a market surpasses the previous peak and moves moderately higher before it runs out of buyers. According to the daily chart, this should be between $ 75 and $ 76 per barrel
Weekly table of crude oil
Source: TVQ
If we look at the situation as a whole, we see also the $ 75 / $ 76 zone as a critical moment. While we expect the resistance in this sector to continue and as prices fall to the bottom of the range, we recognize that $ 84.00 is not impossible if buyers are swept away.
The Relative Strength Index (RSI) continues to increase but it rarely manages to push above 70 on a weekly chart. In cases where the RSI exceeds 70, it is usually short-lived.
Seasonal trend of crude oil
Source: MRCI
Seasonal models in products can be very revealing. Crude oil prices on the market are influenced by annual consumption patterns. For example, refineries are gearing up for the summer driving season in February and March. As a result, demand for crude oil is increasing in the last few months of winter and early spring. This usually gives a boost to energy prices. However, in the middle and at the end of summer, demand for crude oil begins to decline in line with WTI prices. This occurs despite the fact that petrol demand remains high during the Labor Day weekend
The Reality of Negotiating the Fundamentals of Crude Oil
In Finance and Marketing Courses # 39; s economy. We also learn to draw nice linear graphs showing the linear relationship to price
On paper it's simple, an increase in supply should move the supply line to the right and lower the price of oil. Similarly, an increase in demand should move the curve to the right to put upward pressure on prices.
In reality, however, the supply and demand curves are not linear and are not convex. They are probably closer to squiggles. This is because short-term human behavior is not necessarily predictable. In addition, before we can draw a diagram of supply and demand, we must first have accurate, real-time data that simply does not exist.
Even with technological advances, participants in the data market delayed, inaccurate, or both.
Sometimes when a basic history of crude oil seems most obvious, it is precisely when the market turns the page. For example, those trading at $ 150 a barrel in 2008 will tell you that the $ 200 predictions were noisy and compelling.
At the time, the majority of energy market literature focused on the infinite supply of oil and idea that the world is almost exhausted. Few people could have predicted at the time that the most bullish history in the history of crude oil would give way to oil at $ 30.00. I'd dare guess, no matter who daring to make such a prediction would have been laughed out of the room.
Almost as dramatic, during the goods depression of early 2016 a popular commodity market analyst insisted that oil would never trade over $ 44 during its lifetime, and it would not be worth it. He was not alone in this view. Do not worry, the analyst is still alive.
Source: QST
This column originally appeared on June 29 on Real Money Pro, our premium site for active traders and Wall Street professionals . Click here to get great columns like this every trading day.
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