The other day, we posted an article on the possible short-term rebound in the price of Gold. We faced the wrath of several naysayers who mocked our analysis. Well, Comex Gold did find a short-term bottom this past Thursday Globex session into Friday when we took long trades from 1240.1 and ran it nicely through the 1256 area. We use this same style of analysis for WTI Crude today while inherently remaining bullish on Oil.
On the fundamental side of the news, Oil analysts worry about the offset generated by supply and production disruptions in large Oil producing nations like Libya, Venezuela and Iran. While Iran is a whole different issue, we have political issues that mire the situation in Libya almost incessantly and the same is true in recent years related to Venezuela. For Iran, the US is making a huge push with its allies to choke off Oil imports from there related to the overall compliance issue with Irans nuclear efforts. There is also a school of thought amongst supply side analysts that in reaction to the glut in 2016-2017, the reaction to curbing production by oil producing countries has created an undersupply situation. While it is tough to actually analyze this, the opinion based on actual computation of market undersupply is lacking. Analysts pin a number of approximately 600K-700K bpd undersupply. This is not a true measured estimate. One fact is always clear, the world has not started over guzzling oil in the recent past. If at all, the consumption has tapered in the EU due to "green" measures while Asia and Americas remain with slight increases due to growth. President Trump recently tweeted that he had made a request of Saudi Arabia to increase their output by 2 Mill bpd. and that the Prince had agreed. Well, the US President is a guru in selling so a reaction to that tweet that as we saw on Sunday night into Monday with a sharp drop was again, a reactionary trade. Traders react to news and the market eventually balances on facts. Challenging the Presidents tweets without facts are usually counter-productive. He believes the price of Oil is high and that it deters growth. I find it difficult personally to argue against that.
This short trading weeks price action is indicative of the fact that the market is taking the recent announcement by OPEC group that combining with Russia they are bumping up production of 1 Mill bpd in stride. The rally in price this past Tuesday taking the price of WTI Crude momentarily nicely over $75 in my opinion was a natural move based on technical price movement and the frequent news of supply disruptions, this time around including Canada, while not discounting the usual suspects in Venezuela and Libya as well as the looming sanctions against Iran.
Early Monday, Reuters News Agency reported that OPEC pumped 32.32 million bpd in June, up 320,000 bpd from the May figures. The June total is the highest this year thus far. Understand that these supply increases take time by nations (including ours in the form of API & EIA) to be factored into inventory and measured. Some analysis states that the declaration of zero tolerance by the US of Iranian Oil exports to allies is causing bullish investors to reassess the impact of U.S. sanctions on Irans exports, believing that shipments may fall by another 1 million bpd by years end. This is speculative. Iran may begin complying and drop the rhetoric and aggressive behavior and that may send Oil prices plummeting. The oil supply in the market by Iran is not a small number what is supplied or taken off the market will determine whether WTI crude oil surges past $77 toward even more higher ground or drops $10 or more to slightly to between $63 $60 per barrel.
At TradeGuidance, we analyze the Oil market for you daily for intraday and swing traders. At the end of the day, it is not the opinion of analysts or the action by nations or groups that makes your bottom line and we understand that well. It is with this perspective that we present the summary analysis below based on the price action.
For the short-term, that is tonight's open heading into Thurday and EIA news, we expect WTI Oil to find resistance in the $74.30 price area and decline to $72.13 before making another attempt higher. The Tuesday high to low measurement gives us that resistance level.
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Short-term chart of WTI Crude
