Crude Oil – Weekly Analysis, 15/10

Oct 15, 8:48 am

Markets look to today’s Crude Oil inventory report and US economic data

Crude Oil prices have turned weaker over the past 4 days with prices currently down -6.69% for the week to date. Prices briefly touched the weekly highs of 50.12 before declining steadily. On the weekly charts, Crude oil remains range bound within last week’s high of 50.92 and low of 45.21, which was followed through after near 5-weeks of sideways trading. Support is established at $44.85 – $44.80 level on the weekly charts and a test of this support could see prices being well supported in the near term. The current decline in Crude oil comes as the major long term trend line has been broken and the declines to $44.80 support could be seen as a retest of the break out level.

A successful test of support here could potentially see Crude oil aim for the next main resistance at $54 on the weekly chart with a pending gap at $55.59 from the week of 28th June. However, there are significant risks at the support level of $44.80. If support fails at this level, Crude Oil could look towards declining back to the previous lows and could very well fall back into the bearish trend on a weekly close below the major trend line.

Crude Oil Weekly Chart, 15/10
Crude Oil Weekly Chart, 15/10

On the daily charts for Crude Oil, prices paint a more bearish picture with the rising price channel being broken off the support at $47.81 – $47.28 region. Support however comes in at $44.76 region and prices could remain range bound between these two levels in the near term. The main support level of significance is the $42.5 level of support on the daily charts.

We notice a strong hidden bearish divergence on the charts where the Stochastics oscillator posted a higher high against a lower high on price. As such, the support level of $42.39 or $42.5 rounded off gains significance. A break below $42.5 could potentially pave way for further declines towards the previous lows. However, considering that there is a bullish divergence also on the daily charts, we can expect to see some correction in the near term towards the $50 – $52.64 handle.

Crude Oil – Daily Chart: Watch support at $42.5
Crude Oil – Daily Chart: Watch support at $42.5

In terms of the fundamentals, the weekly EIA Crude oil inventories report is due for release later this evening. Expectations are for the Crude oil inventories to have rise by 2.2 million barrels, a modest estimates down from 3.1 million barrels the week before. There is also a lot of US data which could keep the Greenback volatile and could eventually find its way into the Crude oil markets. As far as supply/demand is concerned, there hasn’t been any major progress with the markets currently being oversupplied against weakening demand. With the US earnings season underway, focus will also shift to the quarterly earnings report from the big oil companies which have had to struggle with lower prices for most this year.

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John has over 8 years of experience specializing in the currency markets, tracking the macroeconomic and geopolitical developments shaping the financial markets. John applies a mix of fundamental and technical analysis and has a special interest in inter-market analysis and global politics.

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