Crude Oil and oil markets

Even a casual glance at the daily chart shows that we have seen a significant drop in prices this week, in spite of continuing strong opinions that the OPEC/Non-Opec agreement will be continued as from June.

Prices have dropped considerably back towards lows seen in March and also discounting over half the increases seen after the OPEC agreement was first announced at the end of November last year.


But the concerning factor here is that this is in spite of fact that the OPEC led group has achieved an extremely high level of compliance with the agreed cuts. The conclusion being that continuing increases in other countries’ production, notably the US, is compensating for these reductions.

The problem for OPEC is that if they continue their reduced production levels for a further 6 months, will they start losing their market share as other producers fill the gaps - and without necessarily even achieving the desired price rise that should already be starting to appear.

On the other hand, if they abandon their production cuts in order to preserve and protect their market share they risk pushing prices further down and reducing their revenues in spite of their higher exports.

Whichever way they choose to go, there is a risk that they will fail in managing to reduce global oil reserves, and in driving prices higher, and that they will continue to feel pressure on their overall state revenues and available resources for future development of their industry.

Not much change in oil after an otherwise important and eventful weekend in politics.

Technically, the charts are, naturally, still negative.

We are now approaching the daily 200 sma and the upper edge of the support range earlier this year. The further we drop into this range and below $50 the more likely we are to see some buying appearing and maybe more “peptalk” from OPEC.

For today I am not really expecting anything major one way or the other in the early hours, but let’s see where NY takes us this afternoon. We may well see a touch on that 200 sma around 49.00. On the upside, we could reach the bottom of that broad range around 50.70…

Here’s the current daily chart.

The 5-day short (entry level 52.275 on 18.4.) now has a stop way up there at 53.185 (high from 17.4. WTI) so not much chance of seeing that today (with the caveat of the ever-present unexpected geopolitical events) - just shows how fast and furious the fall has been.


Well with a low of 49.01, I’ll take that as close enough! :smiley:

I have been out of town all day, so I haven’t caught up with any news. Catch up tomorrow.

Here’s the updated daily with a couple of hours to go to the close:


I thought I’d add here the 4 Hour ribbon chart for the entire current down move. A clear move example of MA’s at their best!

Interestingly (at least for me) the turn here once again reflects the reversal of the High-5 method from long to short on the 18.4. (ringed in green). The previous long had already been signalled as over in the area of the red ring where both ribbons had crossed-

I am really looking towards when this 4Hour turns and how it matches the next High-5 reversal.


One issue that is often raised on BP is that technical indicators are bad because they are lagging. My response is always that Price Action techniques are just as much a comparative technique as an indicator, and in many cases even more so. Without some kind of comparative study between where we are now and where we have been before - and why, it is very difficult to establish a view on where we might be going from here. In this sense “lagging” information is a virtue.

But there is another kind of lagging info, which brings with it a need for great caution. What I am talking about is market commentary. The web is full of commentary on just about anything and it is obviously good to follow what is going on in one’s area of interest - but is it good as a base for trading decisions?

A good commentator is often not actually directly employed or involved in an industry, but has good contacts from within that industry. This means the explanation of what is happening now is credible and valuable but is already, by definition, priced into the market.

As a result, what tends to worry me is when all of the good commentaries are all focusing on the same issues and with the same conclusions…

After 6 days of significant crude oil declines, all the commentaries are concerned with the same thing - how far down we are going to go. Is it $45 or $40 or even $35,… and the reasons why this is going to happen. Today I have read about:

  1. OPEC cuts are not achieving anything so far and therefore will not in the future either

  2. the 11 non-OPEC producer countries that are included in the cuts will not necessarily wish to continue

  3. the summer gasoline consumption will be less than expected, adding to crude build-ups

  4. shale production and rig counts increasing in US

  5. general global demand for oil decreasing as a result of marked-down estimates in GNP growth rates

The charts certainly reflect this negativity but we are approaching some heavy previous support areas in the form of previous lows, an upward channel going back to last summer, and the daily 200 sma.

I see this as a pivotal area. If we break through these areas then it suggests there really are genuine fundamental pressures leading to more downside. But if we start to hold and fumble around these levels, then we may start to see the speculative shorts closing out and a rebound - and everyone turning their attention back to, for example, geopoliticals and North Korea.

As so often with market commentaries, when everything looks totally good or totally bad, it is time to anticipate a reversal!

Here is a longer term daily chart going back to last summer. It does look very vulnerable to further declines but I am cautious here in front of these big levels.


Having already done my short trade for the day (probably out again much too soon :slight_smile: but let’s see!), I’ve now turned my attention to another term in the oil industry - the FPSO / FSO - used for temporarily storing crude oil.

These are vessels used by offshore drilling facilities to temporarily store crude until it is offloaded into tankers to avoid tankers having to wait whilst the oil is pumped straight on board. In some cases the production and storage are combined in the same vessel, in which case it is called an FPSO (Floating Production Storage and Offloading).

In addition to storing crude temporarily in between tanker loadings these storage vessels are also used by oil companies to store crude longer term in anticipation of higher prices. Iran stored a lot of crude in such floating storage as a result of the sanctions imposed on them.

Although these FSO vessels are often purpose-built, use is also made of oil tankers which have either been decommissioned from earlier use as tankers or are chartered for the duration of storage.

One example of a decommissioned tanker is the Seawise Giant:

It was built as a supertanker in the 70’s and was the longest ship ever built. Its length, at 458m was 15 metres longer than the height of the Empire State Building in NY(443m).

Is was so large that it could not navigate the English Channel, Suez canal or the Panama canal.

It was damaged in the Iran-Iraq war, salvaged, restored, changed owners and name many times and eventually ended up as an FSO off the coast of Qatar.

Eventually, it was demolished as scrap in India in 2010.





We have talked here a few times about the negative impact of low oil prices on the government revenues of oil producing nations.

An article published today by the Stockholm International Peace Research Institute (SIPRI) gives an interesting perspective on how low oil prices are affecting one aspect of expenditure by a number of oil-dependent countries. Many oil-exporting countries are beginning to report significant cuts in their military expenditure:

‘Falling oil revenue and associated economic problems attached to the oil-price shock has forced many oil-exporting countries to reduce military spending,’ said Dr Nan Tian, Researcher with the SIPRI AMEX programme. ‘For example, between 2015 and 2016 Saudi Arabia had the biggest absolute decrease in spending of $25.8 billion.’"

"The largest cuts in military expenditure in 2016 related to falling national oil revenues were in Venezuela (–56 per cent), South Sudan (–54 per cent), Azerbaijan (–36 per cent), Iraq (–36 per cent) and Saudi Arabia (–30 per cent). Other notable decreases were seen in Angola, Ecuador, Kazakhstan, Mexico, Oman and Peru. Only 2 of the 15 countries with the largest falls in spending in 2016 are not oil exporters. "

Some other interesting highlights from the same report:

[I]“Total world military expenditure rose to $1686 billion in 2016, an increase of 0.4 per cent in real terms from 2015”
"Military spending in North America saw its first annual increase since 2010, while spending in Western Europe grew for the second consecutive year.

The United States remains the country with the highest annual military expenditure in the world. US military spending grew by 1.7 per cent between 2015 and 2016 to $611 billion.

Military expenditure by China, which was the second largest spender in 2016, increased by 5.4 per cent to $215 billion, a much lower rate of growth than in previous years.

Russia increased its spending by 5.9 per cent in 2016 to $69.2 billion, making it the third largest spender.

Military expenditure in Western Europe rose for the second consecutive year and was up by 2.6 per cent in 2016. There were spending increases in all but three countries in Western Europe. Italy recorded the most notable increase, with spending rising by 11 per cent between 2015 and 2016.
[/I]
Source: Home | SIPRI.

So we did indeed see bit of a bounce off these key areas today around the 200 sma and the up channel.

But whether this is sustainable will depend on the first of the US Crude Oil inventories weekly data releases tomorrow from the API.

With US warships close to North Korea afterall, and this time with a nuclear submarine thrown in for good measure - as well as another day nearer the OPEC production cuts extension in May still with no confirmation for Russia that it is going to continue to join in - anything could happen!

But for now, a bit of relief from the downwards pressures - but not a lot…:

Daily chart:


I am a profitable trader and I am offering weekly analysis for free. Here is what I’m expecting oil to do this week.

Today crude shows nice up trend as I prefer but in 1 minute chart and can go upto 49.96+/.10 without any struggle. Since 5M is not yet shown up but sure will show up, I am in now. Let us see.

Hi AV!

Good luck with your trade!

With the overall main focus being on crude inventories at the moment, and the EIA data being released later today, you may well see some good opportunities on the short term charts today before its release.

Early exit is good with these beasts rather than with little profit or loss. What happened yesterday suddenly spiked which i am seeing in other commodities as well. Particularly when they approach to
any one of the extreme side. For example, when silver in very peak and everyone was expecting next level, just in five minutes made drastic down and I also had good loss but in profit due to tight SL.
Just my observation.

Since the overall focus is very much on changes in crude inventories, it was not surprising that there was no sign of fresh selling ahead of this week’s inventory releases.

The downside for now seems to have stalled around the 200 sma, which apparently is a benchmark level widely looked at. However, based on the charts, there is no evidence yet to suggest this down move is over, rather we are at a typical pause session awaiting fresh input and I see possible upside limits around 50.20 and 50.75 for short term trading.

PS: The “High-5” trade 5-Day stop is now at 52.605 (from 19.4.). Entry level was short at 52.275 on 18.4. Position at close yesterday: + 292.50 pips

Daily chart:


Yesterday’s upside is shown a bit clearer on this 1 Hour chart. It is a variation of my normal 1H chart in order to show the ribbons clearer, which form my entries. The blue ribbon has been crossed upwards since yesterday - and still is - but it is up against the overhanging green band which is the 4H chart band (which is compressing as the move runs out of momentum).

I need to see a close below, and a crossover of, the blue ribbon back downwards before (re)selling:


…and, again, nothing to do with crude oil. Here we were deep into the new growth of a fresh, sunny spring and this was the view this morning…it is not just markets that can be fickle, luckily haven’t changed my car tyres yet…!


Not good luck, just luck only today it seems. I was out with little profit and no more trading in Crude today, staying away, You can have a look at Natural Gas for the trend I use to follow just FYI,

…and as we were pondering in an earlier post, when all the commentaries end up 100% in the same direction, it is time to be wary and look the other way!

And so it seems with today’s EIA weekly Crude Oil inventories release. I have not read any analyses yet but it seems we had a much bigger draw than expected and the market shot up immediately.

However, being a cautious trader, I am waiting for price to settle down before deciding what to do next. There was really only one trade prior to the number when that blue ribbon on the 1 Hour crossed and the bar closed under the Daily Pivot for the first time since the early hours in the Far East - that was good for a quick 20 pips. But otherwise it was a slow and directionless day - until the release that is!

But the price is currently too high above the upside breakout for me to buy here. We only have two trading days left this month and I really want to end with a decent profit, so I am double careful about doing anything rash at this stage to spoil that… besides that:

a) I don’t have an identifiable sensible stop level at present

b) I am not convinced this one figure blows away all the recent negative arguments in one puff and it could still give way at any moment.

result? I’m sidelined for now! :slight_smile:

The 1Hour now looks like this:


Surprisingly quiet evening following a release that was so far from expectations…

Trouble is, whilst crude stocks saw a large drawdown of 3.6 mill barrels that was only expected to be around 1.75 mill, and therefore bullish, there was also a large increase in gasoline inventories of 3.37 mill barrels compared with an expected increase of only 1.54 mill, and therefore bearish…stalemate!

But one other interesting bit of news. Apparently, Pemex, the Mexican State oil Company has decided to hedge its entire oil output for the rest of this year, locking in a price of $42 per barrel for up to 409,000 barrels per day. The Finance Ministry has,apparently, based its budget forecast on this sum reflecting a skepticism about further revival in prices this year.

If I remember rightly, Russia has earlier talked of basing its own future budgets on a similar level…

If we do not manage to finish today on a firm note following such a large draw in crude inventories, then it suggests to me there are other real downside factors at work here.

After yesterday’s EIA data, the above-mentioned scenario seems still to be valid. We just fell short of the 50.20 level with a high of 50.17, and the daily 200 sma still seems to be holding…but the upmove was very short-lived in spite of the huge drop in crude stocks and slumped back to the same levels we were at before the release:


There are some fascinating scenarios concerning where we go from here. It would be short-sighted to only look at the crude storage situation because the oil market is a process and it takes many months for oil to pass through it from bedrock to gas station:

oil production=>transport=>crude storage=>refinery=>gasoline storage=>distribution=> gas station=>consumer

Yesterday’s EIA data showed a large drop in crude inventories but also a large increase in gasoline inventories. This is surely normal as the refineries end their seasonal maintenance and build stocks for the traditional summer driving period…but there are unusual situations currently at each of these points in the process:

Production: Will OPEC and the other 11 non-OPEC producer countries extend their productions cuts in their May meeting? by how much? Will the increasing US shale oil production continue to counter the impact of these cuts?

Crude stocks Whilst global crude stocks have generally dropped a little, they are still well above the 5-year average level that OPEC wants - and even if that level were to be achieved, would it also increase prices or just produce better stability at these low price levels?

Refining: Whilst it is normal for refineries to step up their processing at this time of year, the US refinery capacity is already at record highs above 90% (at least, So I have read). So unless there is significant increase in consumer activity out one end, there will be a slowdown in draws from crude stocks at the other.

Consumption: There are reports that US gas station sales are currently below last year’s levels. There is also speculation that the increase in low-consumption and electric vehicles will already significantly reduce demand. This, together with reduced consumption from more efficient commercial vehicles, and combined with an increase in much cheaper wind and solar energy, will tend to de-couple the link between overall energy demand and the demand specifically for oil products. In addition, there are downgrades in overall economic growth in many places.

All in all, there are many issues right now in addition to the basic supply v. demand equation.

On balance, the charts are still negative, but showing signs more of stagnation and uncertainly that any specific trend and this is also noticeable in a widening of spreads, both during last night’s quiet period and again this morning.

My own strategy at present is to grab quick moves off the 15min chart as and when it makes sense with respect to the 1 Hour. Yesterday offered 2 reasonable intraday sells and today also looks more prone to the downside - but I am waiting for the NY session…

Well the direction was downwards today and the 15 min chart certainly did give a good signal early this afternoon, after having spent most of the morning in a state of compression (shown circled in red).

Price had already been continually below the Daily Pivot (blue dotted line) and then the two ribbons just dropped out of the green band and didn’t look back for some 4-5 hours and about 100 pips (I didn’t get that many! :wink: ).

Some comments state that the inspiration for this down leg was the announcement of two big oil fields in Libya, Sharara and El Feel, coming back on-stream pumping oil after recent clashes. Although the additional volume is only about 390,000 barrels a day, it was enough to depress an already negative tone that was just looking for a reason to sell off further.

One thing that pleased me much today (still being a newbie at trading crude): I have often referred to the daily 200 SMA which I had remembered hearing somewhere is one benchmark that the oil market watches. Now, today I read one comment:

“Prices have come under pressure on news from Libya…and quite importantly a break below the 200-day MA.", Eugene Weinberg, head of global commodities research at Germany’s Commerzbank in Frankfurt, told Reaters Global Oil Forum.”

Well there’s the official confirmation of its relevance! As a result, I am now going to officially promote myself from “Newbie” to “Junior trader” of Crude! :smiley:


The Daily chart is evidencing some struggling around three things here: the daily 200 SMA, the base of the upwards trendline, and the $50 level on Brent crude which is more of an international benchmark than WTI and is currently trading around 2,3 dollars above WTI.


Having poked around that general broad area of support formed by the daily 200sma and the $50 a barrel level on Brent, the market started a firm and continuous move back up away from those levels. We are also forming a series of long tails on the daily candles (underlined in brown) whenever we approach the equivalent of $50 on the international benchmark Brent oil. Is this the level that long term buyers are entering the market?

We are also forming some kind of noticeable level at 49.60, which can be seen on the daily chart but I don’t really see it as anything major, but we seem to have halted there many times.

And contrary to what one might have easily assumed during the day’s earlier down move, we again failed to close under that 200 sma:


I read two releases that may have accounted for this intraday reversal (which has also held overnight):

  1. The World Bank issued its latest Commodity Markets Outlook, in which it states that overall energy prices will increase 26 percent in 2017. It is overall optimistic for oil, expecting supply to tighten in the current quarter as OPEC and non-OPEC production cuts start to affect global supply. (worth remembering that there is a time lag of a few months between production cuts and their impact on crude inventories)

The World Bank is therefore expecting crude prices to reach $60 a barrel next year – the same price level that Middle Eastern producers would like to see. But they also maintain that prices are unlikely to go much higher than this due to the effect of continuing increasing shale output.

  1. In another report, the International energy Agency (IEA) confirms that the volume of new oil discoveries hit a record low in 2016 as a result of severe cuts in exploration budgets. Globally, the oil industry only discovered 2.4 bill barrels last year compared with the 9 bill barrels that have been discovered on average each year for the past 15 years.

In addition to a record low in new discoveries, there was a steep reduction in the number of new conventional drilling projects started. Since conventional projects can take years before payback is reached there is currently a preference to develop shale drilling instead, which is much quicker and cheaper to set up. But shale wells tend to be very short-lived with a low oil content. The IEA warns in its report that shale cannot meet future demand on its own without more investment in conventional drilling. US shale still only accounts for around 5 mill barrels per day compared with conventional oil production of 69 mill barrels per day.

Whilst both these reports point to longer term trends and situations, the fact that they appear after the market has been falling for some days and sitting on heavy support levels , not surprisingly, has an affect…

I guess today will be focusing on the US Oil rig count, which has been consistently increasing week by week.

Personally, I am again today only going to watch the 15m chart v. the 1H. This has been a reliable short term trade chart recently and performs well at present. This has been a good and consistent month and I am not risking anything much today, being the last trading day of April. Besides, today may turn out to be short range see-saw, rather than anything dramatically one way or the other.


Geopoliticals are also an ongoing factor with the ever- increasing global focus on the US-China-North Korea situation. Whilst a local flare-up on the Korean peninsula would not be overly or directly significant from an oil perspective, it is totally clear that any military flare-up here would not be contained to a local area at all. Japan and Sth Korea would be immediately involved and China would not continue on the sidelines just asking everyone to calm down…and Russia?

But I have a deep personal aversion to talking about human conflict and suffering in terms of speculative price action, so enough said about that!

So it has been a very quiet day and a quiet end to a nondescript week if one looks at the Daily bars open/close ranges.

We are still living above that tenacious 200sma and every drop below it seems to meet with buying very quickly. We had a bounce right off the uptrend line. With only an hour left for the week it would seem we will close around here right on the 200sma.

The 15m chart was the only one to offer anything today and I only got one short trade out of it - but a pleasing end to a reasonable month.

The US oil rig count was slightly higher than expected, and a Reuters report collated opinions suggesting that oil stocks should be in balance by the year-end, if the OPEC deal is extended. I guess there was little appetite for more than position dressing today, being a long weekend for many as well as a month-end.