Crude Oil and oil markets

Yesterday’s significant drop in prices, it seems, was sparked (perhaps not the best term to use when talking about gasoline!) by the surprise large increase in gasoline stockpiles rather than any change in crude inventories.

The Energy Information Administration (EIA) reported an [I]increase [/I]of 1.54 mill barrels last week, compared with an expected 2 mill [I]decrease[/I]. Whilst crude inventories did fall, crude production levels rose to the highest since August 2015.

This is what makes trading so [I][U]delicious[/U][/I]:

One day we can be talking of higher prices from OPEC cuts starting to bite, geopolitical tensions, and investment bank upward projections (Goldman Sachs and Citigroup predicting $65-70 by year-end)…and the next day we are looking at a seemingly bottomless drop due to US increasing production and inventories, a Syria attack that meant nothing other than an impact on US domestic politics and a naval armada that wasn’t steaming towards North Korea afterall! That’s what’s called dynamic brain stimulation (I just made that up!) :smiley:

Crude oil prices had indeed recently climbed significantly into the $50-60 range and the charts [I][U]have [/U][/I]been indicating a top-out vulnerability for a couple of days as discussed in above posts. This price rise was built mainly on the successful high compliance with the current OPEC/NOPEC production cuts. But this week’s US production figures have again raised the idea that rising U.S. output is undermining and neutralising these efforts to reduce the global glut and achieve a state of balance in the market - all at a sensible price level.

WTI ended up dropping by nearly $2 and was the biggest drop for some weeks.

But behind these figures, the other current factors are still unchanged.Globally, the market is moving closer to a balance and OPEC will still be deciding in May whether to extend production cuts for a further period (and by how much).

Needless to say, all charts are still in negative territory after such a sharp turnaround and I am watching the 1H/15m for the first signs of any return to buying - but it could be a longish wait and, of course, we may still see some continued weakness first!

Whilst my own account equity “stockpile” didn’t see any build from yesterday’s move, it didn’t suffer any draw either. So far this month, as at 19.04. we have had only 12 trading days and a long holiday weekend. I have made 12 trades so far, all long. Of these, only one was a small loss of 9 pips, and that was kind of technical as I didn’t want to take an overnight risk and closed out and re-opened the following day. So I am reasonably happy about that.

My main problem has been closing positions too soon, which is due to this phenomena that oil moves further per “leg” than I am used to from forex day-trading. I need to work more on my exit strategies! I guess this is also partly psychological as this is only my second month in oil and I am dedicated to the principle of “earn while you learn” so maybe I am too eager to take profits.

Whilst it is often said that it is “never wrong to take a profit” - it can actually be [I][U]very [/U][/I]wrong in the long term. Because it destroys the risk/reward ratio that should underpin anyone’s trading strategy! By cutting short the profits but not simultaneously adjusting stop-loss policy, then eventually your losses will start to degrade you profit potential and even destroy it totally. It is extremely important always to keep in mind that money management is not about one particular trade, but about an overall level of performance over a number of trades.

A quick word on the Daily chart:

We have now broken downwards away from that earlier range, and I am now focusing on what appears to be another significant range here at 51.35 to 50.75 that goes back a long way. I have circled several areas where this seems to have previously resulted in congestion and reversals, and may well be significant here, too.

The daily ribbon is certainly weakening but we are still above that 200 SMA. On balance, it would seem we are more in the middle of a broad, level range rather than a new down trend as such.


Hi Manxx,

Thanks for sharing your knowledge and trying to find the reason for a huge price drop. I am also in the learning phase of commodity but not with your style of learning frankly saying. I am novice in technical. What i used to do is, look for strong trend on any one of the commodity (NG, Crude, copper, nickel) and go for a trade. So far it is working good. Trade Opportunities are limited with this approach but at least 2-4 in a week.

Hi av0224, and thanks to you, too for sharing here! :slight_smile:

If TA is a relatively new field for you, what methodogy do you use to identify the strong trends? Do you just rely on a experienced eye on a plain price chart? I often use the toggle switch on my platform that hides the indicator “skin” so’s I can just look at the price chart alone and then replace the indicators again over it - it does help a lot!

I guess you keep you trades open for longer periods than just day trades? How do you judge when is a good time to exit your trades?

Personally, I think 2-4 trades per week is an excellent amount. It indicates that you are very disciplined with your entry decisions and give adequate thought as to its potential beforehand rather than spontaneously or intuitively just reacting ona moment’s whim!

Great to hear that it is working for you :slight_smile: Feel free to talk more about your experiences, if you wish!

Discipline after losing some amount of money without having minimum required knowledge. I just regularly watch the price of these commodities just to get feel of it. Keep an eye on forum discussions (i know only investing.com now babypips.com) for any important news or to see the mood of the traders as a sample.

As a newbie just tried almost all the technical (not in depth) approaches and finally ended with ichimoku (learned very basic) . Whenever i see close to 20-30 degree up / down on the lines with cloud in 5m chart enter the trade. Else no trade. Use 1H 4H 1D to know S/R. The same should be supported with news/ opinions from forum along with my guts feeling.
No carry position since i use leverage.
Today is copper’s day it was bottomed out and now moving up.

Interesting that you should mention Ichimoku. I used to also find that useful in forex, at least on longer TFs. I didn’t abandon it as such, it just naturally evolved into the MA bands that I nowadays prefer. (I have always been an MA fan - people often moan about them because they are so-called lagging indicators, but that is precisely why I like them, because they do lag! - and thereby show the current v. the previous :slight_smile: ).

My only difficulty with Ichimoku was finding a reasonable exit basis with it and it was through that need that I ended up developing my ribbons (now pipelines!).

Just for interest, here are a couple of 4H charts showing how the ribbon crossovers actually complemented the cloud rather nicely, especially with regard to optimising exits (in fact I had forgotten how nicely! :slight_smile: )

The red circle highlights the region where the price started to look vulnerable a few days back and ready for the drop that materialised yesterday - it was already there in the charts!

Maybe the ribbon crossovers don’t show too clearly on these charts, as I tried to get as big a range in as possible.

This shows the current period of strong trending:


This shows the period at the start of the year when the nmarket was tight ranging, the ribbon crossovers still helped to overcome the late entry lagging effect of the cloud in these conditions:


I thought of asking about your approach using the band which is new for me.
By the way the T & K cross over confirms the same, ichi might be little late than your band.
For intraday 1H 4H S/R are the exit points i follow.

Today crude is also showing good up move as i prefer in 5M but not convinced due to yesterday’s fall.

Yes, there has been some upside in London this morning but stopped, at least for now, at that 51.35.

My 15m chart reflects this move but the 1H warns me that it is too soon to buy yet, so I’m waiting to see NY action before doing anything more risky than washing my car in a day of brilliant sunshine here! :smiley:

15M chart small optimism showing, but:


1H chart, dark clouds still overhanging for now:


Today is bad day , many of SL have been eaten it seems, No trade in Crude from my end.

It has certainly been a roller-coaster - especially for anyone trading just off the short-term charts! Although I guess for a “floor trader” type scalper it was a fun ride! :slight_smile:

As mentioned above, the 1H chart had the shadow over it and that was not broken at all so there were no buying temptations at all today. and the 15m chart shows what a “yes it is/ no it isn’t” day it has been.

But it is not really surprising, there are very contradictory pressures in the frame right now and, although it has been an erratic day, the price range has been pretty tight within that new Daily range of 51.35 to 50.75 that we have landed in yesterday - if you look at the candle bodies on the 15m chart (when talking about S/R on a daily chart one cannot, of course, expect precision to the exact pip) - but “someone” seems to be finding value here. But it is clear there is still significant downside risk potential even here, at least in the near term…

In term of fundamentals, it really is hard to say where we go from here. Thankfully, we have charts! :slight_smile: Personally, I am still convinced that the OPEC/Non-OPEC alliance will still do whatever they can to keep prices somewhere at least nearer $60 because their own government revenues are desperately in need of it…but it might be months of similar roller-coasters before that!

Av0224, do you trade futures through a futures broker or CFD’s?

15M chart update:


1H chart update:


Here is one article with an explanation for yesterday’s surprise sell-off, for anyone interested:

Crude: Saudis go for the save | Futures Magazine

Here are the highlights for those only mildly curious! :smiley:

  • Saudi Arabia is trying to talk up the markets saying an output extension is all but done.

  • a 1.0 million barrel drawdown in oil inventory overall and in Cushing, Oklahoma the inability of the market to move higher started a cavalcade of selling.

  • At first, the movement was modest but an hour after the report, a big spike in volume started the market of its downward trek.

  • Part of the selling was perhaps due to the May Crude contract at the NYMEX is expiring,

  • but also due to a spike in computer related sell signals.

  • This morning we are seeing a bit of a rebound. After falling over 3% the market is now up over 1%. The reason is because Saudi Arabia is jawboning the market higher trying to remove any doubt that the OPEC and non-OPEC producers are on track to extend the historic production cut. Saudi minister of energy and industry Khalid A. Al-Falih said that “though there is a high level of commitment [to cuts], we haven’t reached our goal, which is to {get supply}to reach the five-year average. There is an initial agreement that we might be obligated to extend to get to our target.”

So that’s about it concerning yesterday! Time to move on to tomorrow…:slight_smile:

Here is an interesting graphic by EIA demonstrating the size of the cumulative production cuts by the OPEC/Non-OPEC group of producers. It is easy to see from this how these significant cuts should have effectively reduced the global oil glut…and also explains why record increases in US oil production are seen to be neutralising the overall impact by replacing a large proportion of these cuts…


OPEC-NOPEC Have Cut 1.8 mmb/d Liquids Since November 2016.
Source: EIA April 2017 STEO, EIA International Data and Labyrinth Consulting Services, Inc.

Saudi Arabia has cut 619 kb/d (35 percent of total) and the Gulf States Cooperation Council—including Saudi Arabia—has cut 1,159 kb/d (65 percent of the total). Other significant contributors outside the GCC include Iraq (12 percent), Russia (12 percent) and Mexico (9 percent) (Table 1). Nigeria’s cuts are probably involuntary since it was exempted from the OPEC agreement. Iran and Libya–also exempted–and both increased production.

I trade in MCX-India as I am a very small trader and in a learning phase. MCX is a exact copy of international market.It is like watch international market and trade in local.

I felt commodity carry position is for big guys as they move the market. We are just an audience and ride the big moves with our little money. This is what i observed so far in commodity. In big move if I can get 0.3-0.5 % would be good enough for me.

In my view Day / swing trading also risk here without any strong news. I am not sure what is the name for my style of trading. But it saves me at least from BIG loses.

Thanks av, I will come back to your comments a bit later…:slight_smile:

Although yesterday’s price action was very erratic the range on the day was small and the close pretty much unchanged on the day. This new range which is loosely and very broadly around 51.50 to 50.50 seems again to be forming a stalling zone for both bulls and bears.

The flavour of the moment seems to be back to the oil glut and OPEC/NOPEC’s chances of reducing it back to the 5-year average and raising prices towards the $60-70 range. The bulls are banking on an extension to the current agreement that ends in June to the end of the year (meeting on May 25). Whereas the bears are focusing on the record increases in production in the US and increases among other countries not participating in the Non-OPEC group, which they see as countering the impact of OPEC-led cuts.

The simple answer is: time will tell!

One comment I saw seems to underpin the complexity of this issue of balance between supply and demand and whether prices rise as a consequence of balance or not:

[I]"The latest IEA Oil Market Report stated, “It can be argued confidently that the market is already very close to balance.” What does that mean?

Market balance means that production and consumption are approximately equal. That is an important first step for a market in which production has exceeded consumption for most of the last 3 years but it hardly means that $70 oil prices are around the corner.

Market balance must be expanded to be useful: production is not the same as supply, and consumption is not the same as demand. Supply is production plus inventory. Demand is the quantity of oil the market is willing to buy at a certain price–it may be either more or less than production.
[/I]

Daily chart shows the current zone. We are struggling at the bottom of this and there is clearly still vulnerability to further falls (as voiced by some senior people in the oil industry):


The 1H chart showing flattening but still no sign of an upward turn in prices:


…and an interesting “spring” picture from Reuters that has nothing to do with Crude Oil at all (unless we extend content to include global warming issues): :smiley:


Residents view the first iceberg of the season as it passes the South Shore, also known as “Iceberg Alley”, near Ferryland Newfoundland, Canada April 16, 2017. REUTERS/Jody Martin

Out of the topic but just to share , today I am in Natural Gas.

Sounds like you have a very pragmatic and sensible approach to your trading!

Seems the MCX is quite a big exchange nowadays. What are the Crude Oil prices there based on? Do they follow Brent or WTI or is there a more local reference type?

Yes, we are all only minor, insignificant participants in big markets, whether we are talking of currencies or commodities. But even though we are not, even collectively, big enough or coordinated enough to have any impact on market movements, we do have a noticeable role.

It is because of our collective volume and varied positioning that we provide some of the liquidity and continuity that the markets, and brokers, thrive on. In the same way that even the biggest river accumulates from a multitude of tiny raindrops…:slight_smile:

…Good luck with your Natural Gas today!

Price range has been very tight and directionless since last night’s close (50.695) and is trading right now at 50.69. We are still under that green cloud and even below the Daily Pivot all day so far.


Since it seems that US production v. OPEC cutbacks is the current focal point, the Baker Hughes oil rig count later today could be very significant and if there is a significant increase from last week’s count at 683 then we may well see a sell-off into the weekend.

Here is one graphic showing how the rig count has been continually growing over the last year. There are however, a number of opinions that the actual number of rigs is no longer so critical as there are a number of wells that are dug but not producing (DUC’s). For example, in order to maintain drilling and rental rights. But in the current climate, a high number will almost inevitably feed the current negative bias.


With your experience, do you see a way to get to know traders sentiment? I am just thinking . May be vague but testing is needed.

  1. identify good number of forums ,
  2. Fix the time frame like day or from start time to end time
  3. Fix the key word by experience or the down the line can be changed
    Later this can be further sliced with particular type of users based on forum rating
  4. Do simple analysis with those key words , may be simple count would be good enough
  5. Combine that with your knowledge and decide

No Manual work, just run few scripts that will do this kind of tasks in seconds.

May I know your thoughts?