Forex Trading Library

Crude Oil – Weekly Analysis, 19/11

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Crude Oil futures fall on EIA inventory report, but prices stabilize

Crude oil futures fell -1.10% for the day yesterday as the weekly EIA crude oil inventories report showed inventory buildup of 0.3 million barrels, below the estimates of 2 million and down from the massive 4.2 million barrels inventory build up from the previous week. Crude Oil futures briefly tested the lows of $39.89 before stabilizing after the FOMC minutes release. Riding on a weaker US Dollar, Crude oil settled the day at $40.36. The downside in Crude Oil should not be a surprise as we noted in previous reports that there was further downside to come.

In the near term, Crude Oil could see a modest bounce towards $43.40 ahead of further declines which should see Oil prices test multi-year lows below or near $38.1 – $38.9.

Crude Oil Technical Analysis

The weekly charts for Crude oil shows a strong bearish engulfing candlestick last week and so far this week’s candlestick is currently flat forming a doji. A weekly doji pattern could signal a short term bias change with Crude Oil poised for a near term correction. The broken support near 43.40 is likely to be the immediate target for the correction which would also mark the level being tested for resistance. The Stochastics is considerably above the 20 line and marks a higher low in prices. Taken in context, the higher low formed around the week of 4th January 2015 at 48.80 was marked by the Stochastics forming a lower low and in comparison the current higher low could see the potential for a rally to as far as $48.80, if confirmed by the weekly candlestick.

Crude Oil Weekly Chart, 19/11 (Watch the weekly doji formation)
Crude Oil Weekly Chart, 19/11 (Watch the weekly doji formation)

On the daily charts, Crude Oil managed to break the falling price channel’s lower trend line after a quick consolidation near 41.60. Here, again we notice a bullish divergence taking shape as priced closed lower against the higher low formed by the Stochastics above the 20 level. A close above 41.60 could see a near term correction and this resistance level will be key. Expect more downside if prices fail to rally above 41.60, while on the other hand, a close above 41.60 could mark a stronger correction to 43.40 followed by 44.26 level.

Crude OiI – Daily Chart, 19/11
Crude OiI – Daily Chart, 19/11

Looking forward, Crude Oil prices remain in limbo at least in the near term. While oversupply remains the broad theme, the current ongoing developments in the Middle-East, more importantly Syria is likely to overshadow the supply concerns for a short while. On the same note, some non-OPEC members in recent weeks have started to be more vocal, calling for cut in production in order to stabilize prices. Saudi Arabia has been unwilling to cut down on production citing that the US Shale oil producers would more likely benefit from higher oil prices than OPEC members. While the status quo remains unchanged, the OPEC is scheduled to meet in December which could set the tone for the future course of action at least as far as OPEC production is concerned.

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