November Crude Oil bested the $50 resistance level Thursday, October 6, 2016, reaching 50.63 as traders continued buying in the wake of Wednesday’s EIA report which showed crude oil inventories declining instead of an expected increase in inventories. OPEC continues to create bullish headlines as the Algerian Energy Minister said OPEC may cut 1% more off of production than agreed upon at the meeting in Algiers.
He also said OPEC is united and are looking to get price to $50 – $55 in 2017. This is their Goldilocks’ strategy as they feel it good enough to help their economies improve and low enough that the US shale producers will see limited production gains. To keep the potential bullish headlines coming OPEC will hold another informal meeting with NOPEC in October at the energy conference in Istanbul.
The OPEC regular semi-annual meeting is at the end of November in Vienna and they are to have the details of the cuts ready to go. (Yeah, right). OPEC has done it. They changed the tone of the market while actually having some members (Nigeria, Iran, Iraq and Libya) increasing production, just by showing a united front and stating the intent to cut production.
If there are any production cuts they will come from Saudi Arabia as they just finished a summer of record production due to increased domestic demand and do not need to keep production at such high levels. Nothing new here as this is normal for this time of year.
OPEC has done such a good job of talking the market higher that their target could be overtook and the US shale industry is chomping at the bit waiting for their chance to get back in the game.
A break above the trendline at 50.76 could lead to a test of the June high at 51.67, then trendline resistance at 52.04. Support levels are at 50.00, 49.36, 48.24, 47.75 and 47.10.
High 50.63
Low 49.33
Last 50.56
Daily Pivots for 10/7/16:
|
R2 |
51.47 |
|
R1 |
51.02 |
|
PIVOT |
50.17 |
|
S1 |
49.72 |
|
S2 |
48.87 |
|
|
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For those interested I hold a weekly livestock webinar on Friday, October 7 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.
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