Crude Oil Stalls At Key Resistance

June Crude Oil rallied to a new high for the year today (Thursday, May 12) trading to 47.02 as traders continue to react to the supply disruptions in Canada and Nigeria. When US traders came on board Thursday morning they were greeted with the International Energy Agency’s (IEA) May report. The IEA said global demand should increase more than expected and output should decrease by a larger amount than earlier predicted. The IEA raised its demand growth forecast to 1.2 million barrels per day from 1.16 million last month. Most of the growth will come from China and especially India. The IEA said India has become the main growth market for oil.  It lowered its forecast for production by 800,000 barrels from 710,000 barrels. This is mainly the result of the recent disruptions from Nigeria and Canada. There have also been disruptions from Kuwait, Venezuela and Libya. US Shale production has also declined. The IEA said supply gains have come from the lifting of sanctions on Iran and from Iraq, Russia, the United Arab Emirates and of course Saudi Arabia. They said the Saudi’s can increase their output to around 11 million bpd without any problem.  The market also digested yesterday’s EIA report where overall inventories declined by 3.41 million barrels and Cushing’s inventory rose by 1.52 million barrels. Cushing’s inventory levels are nearing maximum operating capacity and are at record levels. Without any increase in new storage capacity Cushing could reach maximum levels this year.

  Crude met stiff resistance at the high and reversed course trading to the low of the day at 45.61. The low was just above the daily pivot (45.44) and Crude bounced from there reaching 46.77 and settling at 46.70. It then drifted lower after settlement and ended the day at 46.44. Thursday’s high tops the high from April 29th and reached a level not seen since early November 2015. Crude Oil weakened at the end of the day which could lead to some profit taking on Friday. I think aggressive traders can sell a break below Thursday’s low (45.61) as this may lead to a test of support at the rising 21 DMA at 44.22. Place stops according to your account size and risk tolerance.

   High  47.02                    

 Low  -  45.61                             

 Last  -  46.44

Daily Pivots for 5/13/16:           

R2

47.77

R1

47.10

PIVOT

46.36

S1

45.69

S2

44.95

     

                           

                                        

                          
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