Crude Oil Forecast: WTI Positioned to Challenge $49.1

Tag: Crude Oil

The rise in crude oil prices last week was reportedly due to increased hopes that major producers will reach an agreement to cut production. However, others’ skepticism about such a cut, the surging U.S. dollar, and a surprisingly large increase in U.S. oil supplies are said to have kept a lid on the move up so far.

On Monday, January WTI settled above the 50 percent retracement of the decline from $52.74 to $42.95 and the 0.618 projection of the wave $42.95 – 47.12 – 45.18. January also settled above the midpoint of the week ended November 4. In addition, KaseX, which uses a combination of Kase StatWare signals, triggered a buy signal (green triangle).

January WTI Crude Oil

The move up is now in position to challenge key resistance at $49.1. This confluence point is near the 62 percent retracement of the decline and the 1.00 projection of the wave up from $42.95. It is also just above the open for the week ended November 4.

The confluence and importance of resistance around $49.1 make it a potential stalling point. However, a sustained close over $49.1 would indicate a more substantial correction and potential recovery to challenge recent highs is underway.

Initial support is near Monday’s $47.5 midpoint and the 21 percent retracement of the move up from $42.95. This level should hold. Key support for the next few days will be $46.5. This is near Monday’s open and the 38 percent retracement. A close below $46.5 would indicate the corrective move up is over and that another test of major support is about to take place.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Crude oil prices continue to decline. Reports indicate the primary culprit is waning expectations for a meaningful OPEC output cut. In addition, some see record level production from countries like Russia and Canada as an equalizer to any cuts that may be made. There is also added uncertainty as US president-elect Donald Trump has pledged to loosen US drilling restrictions, which could boost domestic output next year.

Most technical factors are also negative. December WTI crude oil is poised to challenge the $41.58 swing low made August 3. This is in line with the 62 percent retracement of the move up from $34.06 to $53.62. Key support is $40.0, the 1.00 projection of the wave $53.62 – 41.58 – 52.22. A close below $41.6 would call for a long-term bearish outlook. A close below $40.0 would open the way for potentially $35.6 and lower.

crude oil daily candlesticks

That said, on Monday the move down stalled at $42.2 and formed a bullish hammer. This is a reversal pattern setup that indicates the upward correction may extend first. The hammer’s completion point is $43.9 and the confirmation point is $44.4.

A close over $44.4 would call for a more substantial correction to $46.0. This is crucial resistance for the near-term because it is the 38 percent retracement of the decline from $52.22 to $42.2. Without a bullish shift in underlying factors, it is doubtful that $46.0 will be overcome.

This is a brief analysis and outlook for the next day or so (in this case, a bit longer). Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Traders are reportedly waiting for more information regarding the tentative OPEC deal to cut crude oil production before making up their minds about whether to be bullish. Some pundits say that until the deal is confirmed next month, crude oil prices may continue to soften. A stronger U.S. dollar also reportedly weighed on crude oil prices late last week. However, the dollar has formed a daily evening star setup that suggests it may pull back a bit before rising again.

Last week, December WTI formed a pseudo double top at nominally $52.19 (highs of $52.16 and $52.22). The pattern’s confirmation point is the $49.79 swing low. On Monday, December fell to $49.62 but was unable to confirm the double top with a close below $49.79.WTI crude oil

The rally into Monday’s settle confirmed bullish KasePO momentum divergence on the $0.35 Kase Bar chart. It also setup a daily morning star and hammer setup. This candlestick pattern indicates a test of last Thursday’s $51.1 midpoint should take place Tuesday. This is a very important level for the near-term. $51.1 is also in line with an intra-day $51.0 swing high and the 62 percent retracement of the decline from $52.22 to $49.62. A close over $51.1 would call for $51.6 and possibly for the $52.19 double top to be challenged again.

That said, while $51.1 holds, there is still a good chance for the move down to extend because the double top is still intact. A close below $49.79 would confirm the double top and open the way for $49.3 and lower.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Last week, after WTI crude oil surged higher on Monday, prices eased a bit and an overdue correction started. Media sources indicate prices fell due to concern about persistent oversupply. Traders are reportedly waiting for new bullish news to push prices higher. In addition, skeptics remain doubtful that OPEC will be able to follow through on last month’s proposed production cut.

Technical factors show that the correction should extend to at least $49.1. This is because the wave $52.16 – 49.79 – 51.51 met its 0.618 projection at $49.9. Waves that meet the 0.618 projection typically extend to the 1.00 projection, in this case $49.2. This is also near the 38 percent retracement of the move up from $43.77. The confluence point is $49.1.

clz6-20161017

That said, the correction may be forming a bullish descending triangle. The upper trend line of the formation is $51.1. The move up late today indicates WTI might test this upper trend line before the downward correction continues.

A close over $51.1 would call for the $51.51 swing high to be overcome. This would, in turn, take out the wave down from $52.16 that projects to $49.0 and lower. Therefore, for the move down to continue as expected $51.1 should hold and the $51.51 swing high must hold.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI has primarily risen on the momentum created by the tentative agreement between OPEC members to cut production by 200,000 to 700,000 barrels per day in coming months. The details of such a deal are still being ironed out and would have to be ratified at OPEC’s meeting in November.

Some traders and analysts reportedly believe that the bullish sentiment from the OPEC announcement is now priced into the market and that further external catalyst is necessary to push prices higher. WTI showed signs of exhaustion last week. However, prices were boosted by an unexpected decline in U.S. crude oil inventories late in the week and rose to $51.6 on Monday.

OPEC detractors remain skeptical because much of the world’s oil is now produced outside of the cartel. Many pundits believe that it will take more than OPEC cuts to stabilize oil prices. To that end, Saudi Arabian and Russian officials are set to meet in Istanbul this week to discuss such matters. However, several reports indicate comments made by Russia’s energy minister dampened hopes that an agreement would be reached during their meeting.

The technical outlook for WTI is bullish, but there have been a few signs of weakness. The recent wave formation up from $43.06 is overextended, the Stochastic is overbought, and most momentum indicators are setup for daily bearish divergences. Although there is no definitive technical evidence the move up will stall, a correction should take place soon.

November is approaching key resistance at $52.6. This is the point at which the wave formation up from contract low connects with the wave up from early August’s low. $52.6 is the 0.618 projection for the wave $34.1 – 53.39 – 40.77 and the 1.00 projection for the wave $40.77 – 50.0 – 43.06. A close over $52.6 would open the way for a longer-term bullish outlook with targets in the upper $50s and low $60s. WTI should rise to $52.6. However, given the importance of this level, we expect to see a correction before $52.6 is overcome.

clx6-20161010

Should prices turn lower before rising to $52.6, look for initial support at $50.5 and then $49.6. A close below the latter would call for an extended correction to $48.3. A normal correction should hold $48.3 because it is the 38 percent retracement of the move up from $43.06. A close below this would call for a more substantial correction before the move up continues.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Bullish optimism regarding OPEC’s preliminary agreement to cut crude oil production has reportedly fueled the move higher during the past week. The news came last Wednesday after members met during a conference in Algeria. OPEC will meet again on November 30 to further discuss and possibly ratify the deal. However, many are still skeptical that an OPEC deal will be enough to balance supply and demand if production is minimally cut or capped near record output levels.

Technical factors reflect the underlying bullish sentiment. The monthly and weekly candlesticks are positive and call for the move up to extend. In addition, November WTI overcame the $48.38 swing high. This was important because the move above $48.38 takes out the primary wave down from $50.0 and significantly dampens odds for a continued decline in the near-term.

On Monday, an important target was met at $48.9. The waves that projected to $48.9 now call for November to challenge the $50.0 swing high. Overcoming $50.0 would solidify a near-term bullish outlook and call for key resistance at $52.3. The $52.3 objective is the gateway for a longer-term bullish outlook.

clx6-20161004

That said, bearish divergences were triggered on the $1.00 Kase Bar chart early Tuesday. Therefore, a correction might take place before the move up extends to $50.0. There is initial support at $48.0 and then $46.9. The latter is expected to hold. A close below $46.9 would call for $46.0 and then key support centered around $45.0 to possibly be tested.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Reports indicate increasing OPEC exports out of Nigeria and Libya and a partial shutdown of a major U.S. gasoline pipeline weighed on crude oil prices last week. In addition, U.S. rig counts rose to 416, the highest level since February.

That said, some traders are turning their attention to the late September meeting between members of OPEC and Russia to discuss capping production. However, pundits think any meaningful consensus coming out of the meeting is unlikely.

The majority of technical factors are negative and call for crude oil’s decline to continue.

Early Monday, November WTI rallied to $44.7. However, the move up stalled and failed to settle above Friday’s $44.32 open. A bullish Harami line and star setup formed, but the long upper shadow indicates the pattern will likely fail.

crude oil

Tomorrow, look for at least $43.1 and possibly $42.7. Both targets connect to major support at $42.1, which is a confluent projection for the primary waves down from $50.0 and $48.38. This is also the last major target protecting the $40.77 swing low. Therefore, $42.1 may hold, at least initially.

Resistance at $44.3 is still important for the near term. However, key resistance for the next day or so will be $44.7. A close over this would call for an extended upward correction to $45.3, $45.9, and possibly $46.5.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Charts tell us what the market knows about itself, and right now, WTI crude oil is confused. There are many competing fundamental, technical, and geopolitical factors in play at the moment. Therefore, no one factor has a clear and decisive edge over the others.

October WTI is oscillating in a corrective range and will most likely continue to do so until there is a sustained close over $52.4 or below $41.3. These are the points at which the larger scale wave projections up from $39.96 and down from $53.02 merge with the most recent projections up from $43.0 and down from $49.36, respectively.

clv6-20160912

These waves also show how the connections are made to the important $52.4 resistance and $41.3 support levels.

The longer-term favors a move up, but in the near-term look for a test of at least $43.8 first. A close below this would call for $41.3. A sustained close below $41.3 is doubtful without help from external factors, but would call for a longer-term bearish outlook.

Should October WTI close over $46.6, near-term odds would shift in favor of $47.7, which is the 0.618 projection of the wave up from $43.0. This wave makes a connection from $47.7 to $49.5 and ultimately $52.4. A sustained close over $52.4 would call for the bullish move up to extend to new highs for 2016.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intra-week updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

On Friday, WTI crude oil prices pulled back sharply after the U.S. Federal Reserve signaled short-term interest rates may be raised in coming weeks. The U.S. dollar rose, and oil prices fell. The week ended on a negative note, and the corrective pullback extended again on Monday.

Aside from the stronger dollar, media outlets also indicate traders and analysts are weighing the potential consequences of a still oversupplied market against the prospects of a production freeze. Last week, DOE data showed U.S. inventories of oil and refined products have risen to a record high. However, Iran has reportedly shown interest in joining talks with other major producers regarding measures to freeze production in a unified effort to stabilize prices.

The longer-term technical outlook for oil remains positive. However, near-term factors indicate the corrective decline should continue to extend first. October WTI met the 0.618 projection of the wave $49.36 – 46.42 – 48.46 on Monday. Nearly 80 percent of waves that meet the 0.618 projection extend to the 1.00 projection. Therefore, odds favor $45.5 before the move up continues.

CLV6 20160829

The $45.5 target is important because it is near the 38 percent retracement of the move up from $39.96 to $49.36. A “normal” correction should hold $45.5. A close below $45.5 would open the way for an extended correction and potential trading range in the mid-to-upper $40s.

The move down will remain choppy, but over the next few days look for resistance at $47.9 to hold. Key resistance is $48.7. A move to $48.7 would take out the wave down from $49.36 that projects to $45.5 and lower.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

Declines in U.S. crude oil and gasoline inventories, a weaker U.S. dollar, and recent indications that OPEC and other major producers could take measures to stabilize prices are reportedly catalysts for last week’s near eight percent gain. However, some pundits believe the recent rally may keep the market oversupplied as higher prices could encourage more drilling. This point was emphasized by rig counts increasing by 10 last week to the highest level since February.

From a technical perspective, October WTI settled above key resistance levels at $48.0 and $48.7 late last week. The move up is poised to continue above $50.0, but is in desperate need of a correction. The Stochastic has been overbought, and on Friday, an evening star setup formed.

On Monday, the correction WTI has been waiting for began. Friday’s evening star was confirmed on Monday when October settled below $47.58. The Stochastic’s %K line is falling below the %D line, which is also negative. These factors indicate a deeper correction to at least $46.6 and possibly $45.8 should take place this week. The move down will likely be choppy and corrective, but should extend at least a bit more before the move up continues.

CLV6 20160822

The key support level is $45.8. This is because $45.8 is the 38 percent retracement of the move up from $39.96. A normal correction should hold $45.8. A close below this would call for an extended correction toward the 50 and 62 percent retracements.

Look for initial resistance at $48.3 and $49.0. These are near Monday’s midpoint and open. The $48.3 level will probably be tested in early trading, but should hold. A close over $49.0 would indicate the correction is complete. This would in turn open the way for $50.1 and higher.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary and intraweek updates are a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.