December Crude Oil sold off on Thursday, October 20, 2016, as some profit taking by longs liquidating on a stronger than expected US dollar and Nigeria cutting its official price for Crude Oil. Nigeria is desperate to increase its sales of crude oil and is cutting prices to accomplish this goal. Plus, Russia’s state oil company Rosneft’s CEO said they have the potential to increase oil production by 4 million b/d if needed. If they have this capability it will make any production agreement by OPEC a worthless venture, in my opinion. OPEC and Russia have been doing a little dance as they try to forge some sort of agreement to curb production. Russia doesn’t trust OPEC to comply with any agreement and OPEC doesn’t really want to cut production (they want other producers to cut production) so Russia seems to be forcing them to admit this or to actually come up with a firm commitment to freeze/ cut production. I don’t think OPEC can come up with a firm commitment to freeze/ cut. They want the perception, the potential and not the reality of a freeze/ cut. They want to do the talk but not the walk. Too many OPEC nations need to get production levels higher than they are currently are at for this to work. The best way to end the glut is to improve demand. With the global economy slowing down that will be difficult to accomplish. Crude Oil couldn’t crack trendline resistance (51.98) and settled below trendline support (50.68) at 50.63. Price actually tested the 13 DMA (50.41) and held. The low was at 50.44. If Crude oil breaks down from here, it could test 50.00 then 49.36. The 21 DMA is at 48.96 and could be a strong support level. To get the rally going again Crude Oil should hold the 13 DMA and head back to trendline resistance up at 51.96. A close above here could propel Crude Oil towards the $55 mark.
High 51.83
Low 50.44
Last 50.61
Daily Pivots for 10/21/16:
|
R2 |
52.35 |
|
R1 |
51.48 |
|
PIVOT |
50.96 |
|
S1 |
50.09 |
|
S2 |
49.57 |
|
|
If you are interested in a Managed Futures program for Crude Oil, check out this offering from Walsh Trading:
Walsh Asset Management Introduces Bluenose Capital
For those interested I hold a weekly livestock webinar on Friday, October 21 at 2:30pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
