Trading Crude Oil - Page 22
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  1. #211
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    Manxx is offline Superior Master Contributor and Member
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    Once again the BP bugs strike!

    I just finished writing a post about yesterday's price action as we approach the forthcoming OPEC meeting and when I press the "Post reply" button - poof, it all just disappeared - again! I don't know if this is my PC problem or what, but it happens regularly..................

    This happens to me so often that normally I write my posts in MSWord and then post it here, but didn't bother today - and of course the bug got me.

    I can't write that all again, but briefly, we seem to be trading comments and speeches and predictions for the forthcoming OPEC meeting on May25. Russia has indicated that it will support extending the agreement and Saudi Arabia has hinted that it may well go even beyond the year-end. China has also suggested that it will maintain its oil purchasing and place it into its strategic reserves.

    The Daily and 4H charts are still in negative territory but looking more neutral:

    Daily:

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    4Hour:

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  2. #212
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    Manxx is offline Superior Master Contributor and Member
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    We have spent 2 days now traversing the same narrowish range (at least for oil). It has been a good time for short term chart trades but no progress for longer term positions.

    I haven't seen any new concrete factors today. More talk and speculation about the OPEC meeting, blah blah..

    But one argument did get my grey cells into a twist: Apparently, many hedge funds and money managers built long positions at the time of the OPEC agreement back in December - OK, I understand that. Then over the last couple of weeks, and especially last week Thursday, they modified their longer term view and began closing out a large part of these positions and took a considerable loss - OK, I understand that, too. But then I get a bit lost because the argument continues that now that these long positions no longer exist they are apparently no longer holding the market back and price is able to go higher.....errr, hang on..... so, because all these fund managers were buying the market and holding their positions, the price could not go up? but now that they are closing these positions the market can rally.....errr what??? Well yes, that is what the man said:

    "for the week ending on May 2, hedge funds slashed their bullish bets on oil futures yet again, taking their overall net-long positioning to its lowest level since the OPEC deal was announced in November 2016........If a lot of bullishness has already been squeezed out, there is less built up pressure to push prices down further. Put another way, there is a lot more room now on the upside since everyone got out of their bullish bets. We are moving toward a positioning where these money managers are no longer over-invested,........ This opens up the potential for them to start buying again.”

    Sigh, there was a time when life used to be so simple..................

    Hourly chart for last two days, going nowhere in particular (but the overall bias is still negative):

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    Last edited by Manxx; 05-09-2017 at 04:09 PM.

  3. #213
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    Manxx is offline Superior Master Contributor and Member
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    Nothing much to add this morning. Barring any unexpected events, it seems we are becoming progressively more neutral until the the terms of the renewal of the OPEC/Non-OPEC are settled - although rumours and opinions on it will no doubt throw the price around from day to day. However, we do have the EIA Crude oil stocks release later, which is currently a key issue, and any strong divergence from expectations (which seems to be more the rule than the exception in oil!) will no doubt produce a strong reaction.

    The key "problem" is not just whether there is an extension or not, nor what the terms of the extension are, but whether the extension will have any impact on prices anyway! As long as it remains feasible that the US and other non-agreement countries can increase production to partially counter the reductions by the OPEC/NOPEC group, then the effect of any extension is diluted, the global inventories glut remains, and OPEC market share is reduced and taken up by the non-agreement countries.

    In the meantime, estimates of future global demand have been weakening due to lower economic growth estimates and increased impact of renewable energy sources, which raises a cloud over the extent of possible price increases anyway.

    But the bulls will retaliate with claims that current investment in new conventional production resources are too low to guarantee sufficient supplies in the longer term and that shale production is too small and too short term to meet future demands on its own. In addition, the oil companies also want good profits and will quickly turn off production if prices drop too low. The current estimates are that breakeven costs for US shale oil are, on average, around $30 per barrel (which is considerably lower than for many producers globally) - and then we need a healthy profit on top of that.

    There has been a noticeable tendency for active buying to appear whenever price has dropped much below where we are now, as we saw last Thursday. Are we perhaps finding value around these levels, afterall? Maybe, but while the longer term charts are still negative to neutral it is maybe a bit premature to actually trade on that assumption! I am very much in a stalled, neutral, consolidation mentality and a few day trades are enough to keep me happy right now - at least until the EIA release later today...........

    So all in all, there are sufficient arguments on either side to guarantee plenty of action in Crude trading.

    If we take a longer period look at the 4-Hour chart we can see the move that started around mid April and how it is now stalling. But the best one can say is that it is now neutral and best to trade short term intraday and wait for signals for the start of the next major move - which could be either way from here!

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    Last edited by Manxx; 05-10-2017 at 04:39 AM.

  4. #214
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    Seems we just had a huge draw in inventories according to the EIA report ( -5.247 mill versus expected -1.786 mill). Consequently, a sharp spike upwards. Now to see if this holds and gives added credibility to whether the OPEC cuts are in fact actually starting to work through the "system" - or will it drop back due to continuing skepticism!.....

    4 Hour looks like this right now and still rising:

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  5. #215
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    The response to the significant draw in crude stocks yesterday was significant in that it took price back above the 4 hour green band for the first time since mid April - the start of the current down move. But has it done enough? is it sustainable? is it the start of a new up-trend?

    It is a little disturbing that the price has not since taken out the high achieved immediately following the EIA release, but, on the other hand, it has not fallen back either!

    The general commentary I have seen all seem to contain a lot of bearish "ah but's", i.e.

    ah but: US production is still increasing and further investment in additional production is faster than anywhere else in the world.

    ah but: any extension of the OPEC cuts will be countered by increased production from both US and other non-agreement countries like Iran and Nigeria, who will grab market share from the likes of Saudi Arabia

    ah but: global demand is falling below expectations due to poorer economic growth in OECD, India and China

    ah but: US production is based on greater productivity efficiency than elsewhere and is expanding rapidly regardless of price

    ah but: the US producers have locked in considerable amounts of future profits via hedging and will carry on increasing production even if prices fall further.

    So the move is significant....but where is all the bullish talk?

    Perhaps I should add here that at least Goldman Sachs and the Paris-based IEA are supporting the bullish view, claiming that US stocks do not give the whole picture and that globally stocks are reducing more significantly. Goldman points out that storage costs in the US are comparatively very low and are therefore the last to draw down and are a lagging indicator in the rebalancing process. Goldman also claims the sell off is more due to technical reasons than poor fundamentals.

    One other positive comment points to the simultaneous draw in gasoline, which shows the crude draw is not just a swap of oil from one storage to another.

    The 4 hour looks like this:

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    From a short-term trading perspective, yestday was a great day. Already some hours before the release the market had moved firmly positive on the 1H/15M combo chart (based on previous API release, probably) and gave plenty of opportunity to take a long position with a close stop. There was one scary spike down a few hours before the number but not enough to reach the stoploss level...and then the release paid out.

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    Last edited by Manxx; 05-11-2017 at 01:30 AM.

  6. #216
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    We did manage to hold the gains after the EIA release, and even put in some new highs, but nothing overly dramatic nor has the price action been at all enthusiastic or convincing, considering the size of the drawdowns in both crude and gasoline. My attitude to trading this today has been equally reluctant.....

    The 1 Hour chart shows the erratic movements all day (inside the blue box). I am still not convinced about the upside potential here........

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  7. #217
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    Interesting situation right now. The charts are undoubtedly now positive, but the price action is really lacklustre.

    Everyone knows that OPEC will, with 99.99% certainty, extend the current production cuts in 2 weeks, it only remains to find out a) for how long, b) by how much, and c) will it actually make any difference.......

    Everyone also knows that US shale production is constantly increasing and the rig count is higher every week.......

    The "proof" of the swing to positive in the charts also manifested in the "close and reverse" of the High 5 trade which was stopped out and reversed yesterday at 47.73. This produced its third consecutive win of +455 pips from its entry at 52.275 on 18.4. (previous High 5 trades: +408 and +383 pips). So the current High 5 is a buy at 47.73 (with a scaringly distant stop currently at the recent daily low of 43.73 from 5.5.).

    The 4H chart is positive and we have held well the gains after the EIA crude stock figures on Weds - and we are currently trading above the daily pivot at 47.76.

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    But the price action suggests that the general interest here is, well, what can I say, but...look at the 5min chart for the last 14 hours:

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    But NY will surely wake us up a bit...and then there is the BH US rig count.......
    Last edited by Manxx; 05-12-2017 at 03:58 AM.

  8. #218
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    Here we are nearly some 5 hours later, and after some US economic releases incl. retail sales and CPI. Whereas the WTI crude bid was 47.92 earlier, it is now, 5 hours later, 47.90 - yep, a whole 2 pips difference

    We have seen a little jiggling down and up again, but nothing tradeable really. The Baker Hughes US rig count is due in about another 4.5 hours, at GMT 17.00 (BST 18.00). Last week's level was 703.

    ...Whilst writing this the bid has indeed "rallied" back to 47.92

    My logic here is that by writing how dull and static the price is today, it will definitely start an outrageously, definitively sharp move as soon as I press the "Quick Reply" button....hmmmmm!

  9. #219
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    Didn't happen! Haha!

    But did manage a pathetic handful of pips of the little break downwards. I don't know what caused it specifically but it was an opportunity and about the only one around today....so far!

    The US oil rig count was, as expected, again higher from 703 to 712. In my opinion that doesn't really change anything as it is well in line with the current trend and thoroughly built into the present pricings.

    The charts are not looking any different but maybe a little more "soggy" than before, which only goes to weaken even further any conviction that we are going higher. I may consider going short if we finish weak tonight, but there again it is the weekend. Depends I guess on how weak! Right now it looks like we will end up looking very neutral - as indeed maybe it should with nothing new in the arena.....Have a great weekend!

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  10. #220
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    Do you ever find Fridays are pathetic, at least that's my point of view regarding FX movements.

    I rarely trade on a Friday, and in most instances Mondays too - but then again a three day week cant be complained about...

    I have a significant correlation between the day of the week and averaged returns and yield of trades taken for these two days, it's not rosy

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