Crude Oil Price Forecast Talking Points: The ONE Thing: Positioning in Brent futures has fallen by ~40% from 2018 peak, but could see rebound that helps price remain near recent highs or potentially push beyond. Uncertainty remains surrounding the OPEC and Russia decision at the June 22 meeting on whether to raise production at the June 22-23 meeting in Vienna, but the positioning backdrop could favor limited downside. WTI Crude Oil Technical Analysis Strategy : Crude has fallen deeply after losing nearly 12% from the May peak. Traders will appropriately look to the June 1 high of $67.27. A break higher in the front-month contract could be an indicator of another run toward the low-$70s for WTI. A break below the June 4 low of $64.18 would argue that positioning is set to contract further and helpt he price test the $58/60 zone. Access our recent Crude Oil & Macro Fundamental Forecast here Key Chart Levels For WTI Crude Oil: Resistan ce: $67.24-68.61 per barrel – June opening range high, corrective high from May 30 Spot: $66.14/bbl Support: $64.18 – June opening range low, lagging line Ichimoku cloud support Crude Oil Market Update Monday saw posiitive price action in crude oil on news of a disruption of oil getting to export desitinations in Nigeria, but the long-term trend will likely be dependent on what happens in the coming weeks. Bearish developments in the form of OPEC and Russia relenting on their production curbs have hit the market over recent weeks. However, while the market has focused on Russia and Saudi set to discuss a boost in production, Iran and Venezuela are calling foul. Recently, Iraq said that OPEC should resist urges to raise the global supplies of oil that would limit the price gains we’ve seen. Specifically, the supply curbs have shown up clearly via the futures curve where near-dated contracts were priced at a steep premium to longer-dated contracts on a perceived shortage. Despite the futures premium, Iraq, the second largest OPEC producer has argued that OPEC has not fully reached its stated goal. June 22 is when OPEC and Russia will meet in Vienna to discuss where the state of the current campaign to curb production is heading. Based on recent news that Saudi has recently lifted production to the most since October, they may be already be setting the set to roll-back the production curbs. However, any signs that Saudi has shifted to favor the view of Iraq, Iran, & Venezuela to keep production curbs in play, there could be a sharp shift back into long positions that may lift prices further yet. Positioning May Favor Further Crude Gains Data source: CFTC, Bloomberg The chart above should give hope to the bulls. In short, it shows that despite a reduction of long Brent futures positions by institutions by nearly 40%, Brent has only fallen ~8%. At the same time, inflation measures seem to be holding firm, and a late-cycle global economy tends to be the environment where crude tends to outperform. The drop in longs has come as the fears of new production from OPEC mega-producers align with jumps in US petroleum stockpiles that have resulted in a flattening of the WTI crude curve indicating tightness in the physical market is evaporating. However, any positive fundamental surprise that brings back signs of tightness whether via demand or supply could show that higher crude prices appear sticky and fighting the uptrend may be a more difficult way to profit in this commodity when you could be joining the trend. Daily NYMEX WTI –Unwind has reached identified support, next move important Chart Source: Pro Real Time with IG UK Price Feed. Created by Tyler Yell, CMT Internal trendlines can be helpful in allowing traders to see support for a broader trend. The trendlineis drawn o the chart above shows crude bouncing off higher lows on a slope drawn from the Andrew’s Pitchfork channel. Additionally, the price has found support via the daily Ichimoku cloud. While the price has pierced below the cloud, traders have found that bounces from breakdowns have developed around the cloud. Should a bounce develop, traders should look to the highs of May 30 and June 1 at $67.24-68.61 per barrel. A break and close above there would indicator another run higher. However, a breakdown below the June 4 low of $64.17 would also take price below the internal trendline and favor a broader behavioral shift toward bearishness is at play. Unlock our Q2 18 forecast to learn what will drive trends for Crude Oil in a volatile Q2 Recommended Reading: 4 Effective Trading Indicators Every Trader Should Know More for You: Are you looking for longer-term analysis on Crude Oil and other popular markets? Our DailyFX Forecasts for Q2 have a section for each primary currency, and we also offer an excess of resources on USD-pairs such as EUR/USD, GBP/USD, USD/JPY, AUD/USD. Traders can also stay up with near-term positioning via our popular and free IG Client Sentiment Indicator. Forex Trading Resources DailyFX offers a surplus of helpful trading tools, indicators, and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities, and our real-time news feedhas intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at. If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management. ---Written by Tyler Yell, CMT Tyler Yell is a Chartered Market Technician. Tyler provides Technical analysis that is powered by fundamental factors on key markets as well as trading educational resources. Read more of Tyler’s Technical reports via his bio page. Communicate with Tyler and have your shout below by posting in the comments area. Feel free to include your market views as well. Discuss this market with Tyler in the live webinar, FX Closing Bell, Weekdays Monday-Thursday at 3 pm ET. Talk markets on twitter @ForexYell<doc-sep>People work at the Halfaya oilfield in Amara, southeast of Baghdad, Iraq. Essam Al-Sudani | Reuters Oil prices are heading for a downturn later this year and will sink even lower in 2019 as the fundamentals of supply and demand weaken, J.P. Morgan forecast in a research note on Friday. "While geopolitical tensions and lingering risks of large supply disruptions remain an upside risk throughout 2H18, we think that prices will be corrected downwards towards end of the year and remain capped in 2019," J.P. Morgan analyst Abhishek Deshpande wrote in the note. Despite oil prices recently rising to 3½-year highs, the investment bank left its forecast for international benchmark unchanged at $69.30 a barrel. On Friday, Brent was trading at just under $77 a barrel, off its recent high of $80.50. J.P. Morgan now sees U.S. West Texas Intermediate crude averaging $62.20 a barrel, down $3 from its last estimate. WTI was trading at nearly $66 a barrel Friday, after nearly touching $73 a barrel two weeks ago. The bank knocked down its 2019 Brent forecast by $1, to $63 a barrel. It lowered its outlook for WTI slightly to $58.25 a barrel. An OPEC meeting in two weeks will determine the short-term price movement, the bank says. Oil market heavyweights Russia and Saudi Arabia have recently signaled they could ease a deal between the 14-member OPEC and other producers to limit output, which has been in place since January 2017. The Saudis and Russia are wary of prices rising high enough to dent demand as Venezuela's output continues to decline amid an economic crisis and as U.S. sanctions come into force against Iran, OPEC's third-biggest producer. Oil prices suggest the market is betting on an output increase of about 400,000 barrels a day, according to J.P. Morgan. "We think there might be one last hurrah (upside) when it comes to prices especially if OPEC were to announce a release of barrels which is less than what markets have priced in currently," Deshpande said. Still, J.P. Morgan thinks the rally would unwind. That's because any move by OPEC to ease output caps would signal a return to pre-2017 production levels. It would also tip the finely balanced oil market towards oversupply starting in the fourth quarter, when the restored barrels are likely to start arriving at import terminals. J.P. Morgan already believes the supply-and-demand fundamentals of the market are poised to weaken.<doc-sep>Oil Talking Points Oil prices are under pressure even as Iraq Oil Minister, Jabbar al-Luaibi, argues that the Organization of the Petroleum Exporting Countries (OPEC) and its allies have yet to meet the production-cutting quotas laid out in 2017, and recent price action raises the risk for a further decline in crude as it initiates a fresh series of lower highs & lows. Oil Price Forecast: Range at Risk as Bearish Series Takes Shape Crude appears to be stuck in a narrow range as market participants eagerly wait for the OPEC meeting on June 22, and the extraordinary efforts to rebalance the energy market may keep oil prices afloat as the group & its allies pledge to reduce output throughout 2018. In turn, more of the same from OPEC may prop up crude prices especially as officials in Saudi Arabia look for $80/bbl, and the ongoing expansion in shale production may require OPEC & its allies to carry the production-cutting quotas into 2019as U.S. field output climbs to record highs. However, a material change in the output schedule may generate headwinds for crude especially as drillers in Russia stand ready to ramp up production, and oil stand at risk of facing a more bearish fate over the summer months as the Trump Administration shows a growing interest to curb energy prices. As a result, crude remains vulnerable to further losses, with oil prices at risk of giving back the advance from the 2018-low ($58.11) as both price and the Relative Strength Index (RSI) snap the bullish formations from earlier this year. Oil Daily Chart The string of failed attempts to push back above the $66.00 (38.2% expansion) to $66.30 (61.8% expansion) region may keep oil prices under pressure, but need to see a break/close below the $64.30 (50% expansion) to $64.80 (100% expansion) zone to favor a larger correction. Next downside region of interest comes in around $62.30 (38.2% expansion) to $62.80 (38.2% retracement), which sits just above the April-low ($61.84), followed by the Fibonacci overlap around $59.00 (61.8% retracement) to $59.80 (23.6% expansion). For more in-depth analysis, check out the Q2 Forecast for Oil Interested in having a broader discussion on current market themes? Sign up and join DailyFX Currency Analyst David Song LIVE for an opportunity to discuss potential trade setups! Additional Trading Resources Are you looking to improve your trading approach? Review the ‘Traits of a Successful Trader’ series on how to effectively use leverage along with other best practices that any trader can follow. Want to know what other currency pairs the DailyFX team is watching? Download and review the Top Trading Opportunities for 2018. --- Written by David Song, Currency Analyst Follow me on Twitter at @DavidJSong.<doc-sep>
U.S. West Texas Intermediate and international-benchmark Brent crude oil closed lower in a relatively uneventful week. The news was essentially bullish, but not enough to change investor sentiment that is being primarily driven by fears of increased production from OPEC and its allies. July West Texas Intermediate crude oil settled at $65.74, down $0.21 or -0.32% and August Brent crude oil finished the week at $76.46, down $0.86 or -1.12%. Weekly July WTI Crude Oil Fundamentally, the U.S. Energy Information Administration reported another rise in U.S. production. The EIA said crude oil output hit another record last week at 10.8 million barrels per day (bpd). U.S. crude inventories also rose, gaining 2.1 million barrels in the week to June 1, to 436.6 million barrels, according to EIA data. While the weekly EIA crude oil inventories news may have been supportive, the story providing the most support for prices came out of Venezuela. For weeks, traders had been reacting to reports that OPEC would increase production partly because of short-fall in Venezuelan output. This week, however, it was revealed that the situation was much worse than anticipated. According to Reuters data, Venezuela is nearly a month behind in shipping crude to customers from its main oil export port as chronic delays threaten to breach state-run PDVSA’s crude supply contracts if they are not quickly cleared. Weekly August Brent Crude Oil Reuters went on to say that tankers waiting to load more than 24 million barrels of crude, almost as much as PDVSA shipped in April, are sitting off the country’s main oil port. The backlog is so severe, PDVSA has told some customers it may declare force majeure, allowing it to temporarily halt contracts, if they do not accept new delivery terms. In other news, gains were limited by concerns about surging U.S. output and falling demand in China. Additionally, sellers also reacted to the news that J.P. Morgan cut its crude price forecast. Finally, according to General Electric’s Baker Hughes energy services firm, U.S. energy companies added one oil rig in the week to June 8, bringing the total count to 862, the highest level since March 2015. Story continues Forecast WTI crude oil continues to sit at a key level on the charts. Trader reaction to this area will either fuel the start of a meaningful short-covering rally, or another steep plunge in prices. The chart pattern indicates that investors are waiting for OPEC to make the next call. If OPEC decides to make up for the entire Venezuelan shortfall plus any shortages it expects from sanctions against Iran then oil prices are likely to retreat further. If OPEC decides not to make up most of the shortfall in Venezuela, or if the troubled nation decides to declare force majeure then we could see a spike to the upside in prices. Traders are also concerned that the OPEC-led group will do nothing to fill in the supply deficit from Venezuela and the potential sanction related shortage from Iran. OPEC-member Iraq said Wednesday that a production increase was not on the table as the market was stable and prices good. This indicates that the 1 million bpd increase that the market has been pricing in for two weeks, may not take place after all. OPEC is set to meet at its headquarters in Vienna, together with top producer but non-OPEC member Russia, on June 22 to discuss production policy. This article was originally posted on FX Empire More From FXEMPIRE: