Crude Oil and oil markets

Where the heck have you been Manxx! :slight_smile:
Hope you stick around. This forum is so depressingly insipid it needs a massive dose of luuuuuuuurve :heart: :heart: :heart:

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Yesterday did indeed turn out to be a quiet one and seems to have traded quite technically, achieving the anticipated range of:

The days’ range with my broker was 45.89 - 47.07 but this varies slightly with different brokers and with the futures market itself off which the CFD’s are priced. In fact, the pricing of CFD’s is something that maybe I could investigate more and write about here.

But I would add here that this thread is not intended as a “follow-me” trading method or advisory service. I want to highlight the major factors currently affecting the market and its possible overall direction, look deeper at the countries and organisations that make up the market and some of the technological aspects of the oil industry.

If anyone is looking for actual trade suggestions then I noticed that another thread has started on BP offering just that. I have no idea who the OP is (Tradersonflow) or whether his suggestions are worthwhile but he is offering daily trading suggestions. You will find it here: Crude oil Daily Plans . But I emphasise that I have no idea about its worth or what the suggestions are based on and this is by no means any kind of personal recommendation. I always recommend that traders develop their own methods and plans.

Today is the US Independence Day and note, therefore, that this week’s EIA release (which is currently very influential on oil prices) is moved from Wednesday to Thursday at 15.00 GMT. However, this evening at 20.30 GMT we have the API inventories data. This may well impact on tomorrow’s prices due to the delayed EIA data this week, but the release details do often differ substantially from the EIA data and therefore reaction is often muted whilst waiting for the subsequent EIA release, which is usually the next day (on Wednesdays).


The current turnaround from the low prices of the last few weeks was catalysed by the slight drop in U.S. oil production by 100,000 bpd reported last week by the EIA, which was interpreted as indicating that we are eating into the profitability of the marginal shale producers. A drop in domestic gasoline stocks also helped the rise in prices in spite of an increase in actual crude stocks by 118,000 barrels.

I am sure that this up move, once started, also prompted short-covering and profit-taking ahead of the long weekend and because it was both a month-end and the end of the 2nd quarter accounting period.

However, is there likely to be further follow-though this week? The traditional increase in petroleum consumption during July 4 week may well help but I am not sure whether that will be reflected in this week’s release on Thursday or the following week’s Wednesday release.

But the US is certainly not looking to reduce its output nor are other producers including the OPEC members Libya and Nigeria, who are exempted from the OPEC/NOPEC production cuts agreement because of the internal problems.

It is also worth noting that Goldman Sachs has reduced its three-month price forecast for WTI oil from $55 to $47.50.
Unless either the US and others reduce their production levels or OPEC decides to increase its level of cuts, It really seems that we are stuck in a range where the lower end around 40-42 dollars starts to hit the breakeven point for some drillers, who then turn off the taps, and an upper end around 50-52 dollars, where more drilling comes on stream and companies look to lock in their prices.

It is also worth keeping an eye on the situation in the Middle East for at least three reasons:

  1. There is a growing tension with the situation with Qatar (and Iran) and Saudi Arabia and its allies. Any major fall out could have a big impact on prices.

  2. The OPEC/NOPEC countries have so far complied well with the terms of their agreement, but if reduction in market share and domestic financial pressures start to cause problems then the compliance may start to fall apart.

  3. The Saudi Arabia IPO for Aramco (the state-owned Saudi Arabian Oil Company, valued at anywhere between US$1.25 trillion and US$10 trillion, depending oil price) is a major deal for next year and it is crucial to Saudi Arabia that the oil price is favourable for it to achieve their objectives in moving the entire country away from dependency on oil revenues in thefuture (I want to write more on this in another post).

In addition to these supply side factors, it is also worth watching the demand situation, particularly in China which is the largest net importer of crude oil. Any change in China’s economy has a noticeable impact on oil demand.

Truly, trading Crude Oil keeps you focused on a vast range of global events! :slight_smile:

High-5 trade:

Entry: 44.42, stop: 43.30 (low from 27.6.) Current position at close 3.7.: +261.5 (47.035)

Just a possible warning, I wrote earlier that:

However, I am sure I saw a post there just a while ago where the OP stated that the chart template he uses is a product that he sells. That post seems to have disappeared now, so either I imagined it or it was removed. Either way, if you are following those trade recommendations, be wary and exercise the caution that should always be present when considering 3rd party advice…


Saudi Arabia holds the second largest proven oil reserves in the world at around 22 per cent of global reserves, and is the largest exporter of oil. It is geographically a large country with a population of over 32 million.

It is one of the founder members of OPEC and its most influential member state.

Saudi Arabia’s economy has been successfully dependent on its energy sector for many years and, according to OPEC’s site, “the oil and gas sector accounts for about 50 per cent of gross domestic product, and about 85 per cent of export earnings”.

However, in recent years Saudi Arabia, like other energy-dependent states, has felt the negative impact of low oil prices on its state revenues and this has caused problems with its planned state expenditure.

Its oil industry is dominated by the state-owned Saudi Arabian Oil Company, ARAMCO, which is the world’s biggest energy firm, producing all of Saudi’s 10.25m barrels a day, which is more than double that of Exxon and Rosneft in Russia.
Saudi Arabia is currently considering a partial privatisation of 5% of ARAMCO via an IPO (Initial Public Offering) either in New York or London. Although this move is stimulated by the reduced revenues from low oil prices, it also reflects Saudi’s aim to diversify its economy away from energy in the future. The funds raised by this IPO will go a long way towards the achievement of this diversification.

This deal is huge for Saudi Arabia and the valuation of the company for the issue is extremely important and highly dependent on the level and prospects of oil price. For this reason Saudi Arabia has a very strong reason to do everything it can to achieve and support a firm level of oil prices. But it cannot do it alone and if it needs further production cuts it will remain to be seen whether other OPEC countries will be prepared to accept further reductions in both income and market share.

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I read yesterday one interesting viewpoint concerning the possible motivations behind the Saudi Arabian ARAMCO IPO!!!

ARAMCO is the biggest energy company and possibly the most valuable company in the world. Being state-owned it owns/controls 22% of the entire global oil reserves.

Whilst that may make Saudi Arabia extremely valuable, it does not make it rich unless it can convert that oil into money - and as we all know, if you own a lot/too much of something you cannot just sell it all down on your local street market.

What if SA is taking a long term look down the road and sees that oil will soon only be used in production processes and no longer as a major fuel in transportation or heating fuels, etc? What if then the bottom will have totally dropped out of oil demand and its value and all you are left with is a huge sticky mass under the ground that is barely worth the cost of extracting it?

So what do you do if you own a company that owns a huge amount of black gooey stuff, that is currently very valuable, but cannot be sold fast - and whose value is going to decline repidly in the coming years?

Easy: if you can’t sell the oil, sell the company…:wink:


First a correction! I wrote yesterday that:

I did wonder at the time why the API release was not also shifted one day, but that was what the calendar said so I believed it! :smiley: But it is actually now on the calendar for tonight at 20.30 GMT.

Generally, commentary seems to be split 50/50 on whether we are going up or down from here. Last week’s bullish impact from a small drop in US output and a first drop in US oil rig count for 23 weeks is based on only one week’s data points, but if these are repeated in the EIA release on Thurs and the rig count on Fri then we will see higher values from here. And…if we dont, we won’t! ha ha! :slight_smile:

The limited power of my small brain cell can only deduce that these figures only showed a possible baseline in effective value rather than reason for a continuing rise in price. And that was already at some 500 pips ($5/barrel) below where we are now. Brent is already back around the $50 range.

The underlying fundamental situation has not changed. There is still a global oil glut that is far above the 5-year average that OPEC wants to return to, various countries are still ramping up their production levles which is diluting the OPEC/NOPEC cuts in production, demand levels are still rather weak, OPEC members themselves are also showing strains within the compliance requirement, and OPEC itself is becoming entangled in other non-oil issues.

And on top of that, we are now right in the middle of a perceived range of lower US40’s to upper US50’s…

Conclusion? Thank goodness for technical analysis! We don’t need to decide for ourselves - let’s just see what the majority of everyone else is doing instead! :smiley:

My charts (obviously) show the market in a bull trend and that excludes any thought of selling right now. My only concern is how much potential is still left on the upside. So I am trading long off the 15m chart for whatever I can get rather than sitting with a long position.

I have simplified what I show on my chart but also added, at this stage, experimentally, the Ichimoku cloud. This is a throwback to an earlier stage in my charting and somehow it got dropped along the way. At that time I was day-trading EURUSD and on a 15 min TF and it wasn’t very useful. But when applied to the Daily, 4H and 1H oil charts it does seem to give some “structure” to them, even if not used for the actual trading signals. Right now the 4H and 1H look like this:

Since I also trade the same “triple screen”, MTF approach, which is the basis of the popular 3 ducks trading system (found here), I have also added the 60-period SMA in blue dot-dash for comparative interest…:slight_smile:

High-5 trade:
Entry: 44.42, stop: 43.605 (low from 28.6.) Current position at close 4.7.: +263 (47.05)

Hah! Now we see how much fun trading can be! :smiley: :smiley:

Having just written this:

…no sooner had I managed to post it than the bottom dropped out and we closed under the 1H cloud and 60 sma!!! NO chance of any buying before that!

So I tried a short, although rather late in when I noticed the move, and scambled out with a whole 2.5 pips profit - hooray! that’s another takeaway tonight :smiley:

Well better than a loss anyway - now we wait and see what NY makes of it before doing anything else…

SO here we see: any view is only as good as the moment it is made, 5 mins later and might be very different! Fortunately it is not always like this! One has to remain flexible…

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Well! Quite a turnaround today! In the morning it was all about how much space there might still be on the upside. A few hours later and it was clear we were not going anywhere upwards at all!..quite the opposite. in fact!

I readily confess that I do not do so well in these kinds of sharp, fast reversal moves. It takes a lot, even after years of trading, to turn 180 degs and go aggressively the other way in a matter of minutes. I managed a couple of short trades but nothing to boast about at all - too late in and too early out - but at least they were wins anyway!

I don’t really know yet the reasons. There was talk of Russia reversing its earlier statements concerning the possibility of larger OPEC/NOPEC cuts and now saying they will not agree to such a move. Then there was Qatar talking about boosting its gas exports that suggested the OPEC oil cuts deal might not hold so well… and then there was the one I liked best: Volvo cars (owned by the Chinese carmaker Geely) stating that as from 2019 all their new car models will have an electric engine, either all electric or hybrid - headlines claim this is the start of the end for the internal combustion engine…

The 1H chart nows looks like this - in hindsight a nicely technical swap from bull to bear with a crossover on the green MA band, a drop through the cloud, below the 60sma and the RSI through 50:

I really should have got more out of this than I did. Especially when we look at the Daily indicators box (remember this is not a trading chart, it is just a compilation of popular indicators used by many). As I said above about this chart, it was really only showing a retracement off the lows - now look at it regarding the 50% Fib retracement and the bottom edge of the cloud, huh, sometimes these technicals can by really spooky…!!!

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Hey Manx, I enjoy reading you.
Maybe our combined analysis will be even more useful ? If you watch my last post of today and plot the line I mentioned you would probably have gotten it =] Maybe maybe not ! I was one click away from selling in the .60s. Estimated I was going to stay with the little profit I made without risking more.

In any cases your recaps are sure helping my understanding, good job !

Yeah today was peculiar I believe, FOMC type of entry, priced a few hours before. But as you mentioned it made very much sense, in hindsight.

See you soon, I ll be laying out my plan for friday, tomorrow.
Thatd be interesting to exchange with you.

Keep up,


Gotta love how this move down also happened at a round number level [47.0] - a simple tactic that forms the foundation of all my own work. You’d be surprised just how often this holds true; and evidently not just in FX.

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Yes I have noticed that too. In fact there is quite a lot of stuff on the net about Pyschological Trading Levels such as the “double 00’s”.

I have also noticed that it seems a lot of people do the same as I do and place their targets/stops just before or after these levels. It manifests itself in the form of price movements usually failing just short of such a level at its first approach, retracing a little and then retrying and eventually breaking or retreating from these levels.

I can’t think of any logical reason why this should be except that it has a psychological feel about it and has become somewhat self-fulfilling though its wide acknowledgement! But who cares why if it works! :smiley:

Thank you. Yes, I will be watching what you post…

I should mention that although I have traded currencies for some time, I am a total newbie to Crude Oil and only swapped over to this a few months back. So far, I have no regrets and I enjoy the topic itself as well as finding it profitable.

I believe, and I may be incorrect, that it has quite a lot to do with ‘Option Trading’; which are typically priced at/ expire at round number levels. So, in order to protect a deep option trade the level must not be breached, hence the round number level holding. This roughly translates through to the Spot FX markets also, which is why we get this phenomenon - although there is some rational logic behind it. The bigger the option barrier, the stronger the round number level. Same approach for FX and commodities.

And, as we know, some option trades in commodities can be truly huge - most recently (off the top of my head) was in Silver.

Citation: “A barrier option can be a knock-out, meaning it can expire worthless if the underlying exceeds a certain price, limiting profits for the holder but limiting losses for the writer. It can also be a knock-in, meaning it has no value until the underlying reaches a certain price

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It sometimes happens that a market can get itself into such a frenzy of conflicting views over a relatively simple issue that one can only conclude that all it can do is trip over its own shoelaces - first the left foot and then the right!

Firstly, we had the experts claiming that oil had officially entered the bear mode, having dropped over 20% from its recent highs - reason being doubts about OPEC succeeding in shrinking the oil glut because of increasing US shale oil.

That was immediately followed by a straight series of up days - reason being that prices had reached the US shale oil breakeven and taps were being turned off.

Yesterday morning we saw a sharp and deep drop in price - reason being Russia says it is not interested in deeper production cuts within the OPEC/NOPEC agreement.

Yesterday evening sees a bounce up in prices - reason being the American Petroleum Institute (API) reporting a larger than expected draw of 5.764 mill barrels in US crude oil inventories (expectations were for only a 2.83 mill barrels draw.

The API also reported a large drop in gasoline inventories of 5.7 mill barrels compared with an expected draw of only 500,000 barrels. Since this figure is for the week ending June 30, I don’t know whether this already includes the usage over the US July 4 holiday. I assume these figures are based on gasoline distributors’ orders from the refineries and not the actual retail tanking at the gas pumps, so I guess it does already reflect the holiday consumption.

Here is the API table of changes in Crude Oil Stocks for this year:

Anyway, getting back to the point, later today we will have the EIA versions of weekly Crude Oil and Gasoline changes, and these often differ substantially from the API reports. So will we get yet another kneejerk reaction?

The point is, all these issues relate purely to the current amount of oil in storage and whether it is going to reduce to the levels desired by OPEC or stay high? But whilst no one is actually dumping huge amounts on the market at rock-bottom prices, how much does this issue really matter? Afterall, we are not talking about a scarcity of oil, nor are we talking about possible price wars like we have seen before.

Maybe what we are really talking about is whether OPEC controls price via the supply taps or does the US? The current US policy is to focus heavily on increasing hydrocarbon energy forms, achieving greater independence in meeting its own energy requirements and utilising energy resources in its negotiations with its trading partners. Nobody wants super-low prices but higher prices are going to be met with correspondingly greater production, and not only in the US.

But as we all know, markets are speculatory and trade on the flavour of the day…:slight_smile: and that’s why we like them. A think one of the key qualities of a good trader is a total lack of a logical mind - never look for sense in the move, only how far is it likely to go! :smiley:

Interestingly, the oil market seems to have totally ignored the geo-political problems brewing around North Korea. There has been a lot of continuous rhetoric and muscle-flexing going on for months, but no one has seriously believed that Nth. Korea was a serious global threat. Now that has changed with the US acknowledging that Nth Korea tested, apparently successfully, an ICBM capable of reaching the outskirts of the US. This issue is surely coming to a point of no return where a solution has to be found.

But we have three of the biggest global oil nations involved in this: the US, Russia and China. And these three do not have the same thoughts how this issue should be resolved. Relations between the US and Russia are already severely strained and it looks like the US and China are now also going to fall out over this.

Personally, I consider this a far more serious issue than counting the barrels in the storage depots. Both Nth and Sth Korea are heavily populated countries and are technically still at war with each other. Even a limited, local clash could be disastrous, but if these three super-powers are drawn in then we are into a cataclysmic scenario that could escalate far beyond those two of the last century!

But in the short term for this week? I have no view, my charts are mixed and neutral. So I am (again) trading mini signals on the 15m chart for a fixed 15-50 pips per trade - in either direction.

Interestingly, the stop has now jumped to yesterday’s low at 44.51 and now locks in a profit of +9 pips. It was currently in profit at yesterday’s close by +115.50 pips.
THe High-5 method is found here: Starting out trading and dont know how to make Profits?

Good point!
I remember in the good old institutional days, that we had a customer-based OTC options portfolio that we often hedged through the exchange-traded options with strike prices on the “psychological” intervals. The aim was to keep the book fairly neutral and profit from the time decay but deep in-the-money options were often matched with futures or spot positions. I was not so directly involved in that side, my options trading was more related to exchange-traded US interest rates, eurodollars to T-bonds, (but thats going back enough to stretch my memory a bit!).

It is certainly getting tough to earn a living this week from oil! Most of the day was totally dead in the water, just tightrope walking along the daily pivot line waiting for the EIA US oil stocks release. Then when it came it was a huge draw of 6.3 mill barrels - even more than yesterday’s API release. This prompted a quick spike up and then stopped in its tracks. This raised a strong suspicion that if it could not immediately climb higher then something was “wrong” and it most likely would collapse back a bit…but how far?

This was the dilemma then! Yesterday we climbed strongly on the API’s draw of 5.76 mill barrels so how far could we fall on the EIA’s even greater draw of 6.3 mill barrels!!!

But I sold it anyway and of course, closed out when it reached the daily pivot line for a meagre 21 pips win - only to see it then crash through it and drop a further 80 pips. :grin:

My only comfort lies in still being somewhat “junior” in oil trading and I am still extremely cautious with my trades. In addition, these kinds of daily reversals and contrary news events are hard to trade with any conviction and confidence. Indeed it is weeks like this that reinforce my view that trading for a living is not a good idea. I would always prefer to be pleased with 21 pips because it is more than zero rather than frustrated with only 21 pips because it wasn’t the 100 pips I needed. These are important issues for all traders to consider when thinking how much they wish to rely on trading for a living.

Well, never a dull day in Crude Oil. Tomorrow evening all eyes will be on the BH US oil rigs count after last week’s decline - the first in a straight run of 23 weeks. If it is down then we go up - if it is up we go down :stuck_out_tongue_winking_eye:

This is today’s hourly (so far):

Yesterday provided a very good example of how markets initially react to, and only later interpret, high-profile news releases.

The EIA weekly release on Crude Oil stocks is a similar high-profile release to the monthly NFP in forex. They are both hyped up numbers and actually provide a fairly complex range of data and not just one number. But the speculative trade, including probably nearly all retail traders, tend to focus on only one main, highly advertised, statistic, compare it with the analysts’ estimates, slap on a trade and see what happens. All other data included with the release is generally ignored… until the analysts dig into them.

We rallied strongly on Weds’ API data showing a big draw in inventories of both crude stocks and gasoline. Then yesterday saw the EIA release even bigger drawdown data for both categories - and sure enough we spiked up again. But the gain almost eerily stopped dead and oscillated around, undecidedly, for a full 2 hours after that. Then it made up its mind and started a strong sell-off that continued overnight (and probably during today, too).

So what was the deal?

The trader’s usual focus is generally on the difference between the actual release and the experts’ predictions, and we call this “Fundamentals”. But Fundamentals are much more longer term than one data item and are the underlying trends that continue to affect prices over a long period regardless of the occasional blips in the other direction.

This was the case with this week’s crude oil inventories data.

The positive sentiment initially created by the two falling inventories figures was quickly snuffed out as soon as the market realised that another aspect in the data release showed an increase in US production by 1% over the week to 9.34 mill bpd. Now this was a data item confirming the long term fundamental that US oil production is increasing towards record levels and is also a govt priority…production output and stocks are not the same thing, so the market shed the stocks figures and grabbed the production increase and…down we went! :slight_smile:

This also happened to occur at a time when there was evidence of increasing oil exports from OPEC nations in spite of the cuts in production allowances suggesting strains within OPEC concerning market share. When you throw petrol onto a smouldering fire you get…

One other piece of news underlined the US administration energy policy for increased hydrocarbon production:

The US Interior Secretary, Ryan Zinke announced plans to speed up processing of applications for oil and gas drilling as well as more frequent sales of drilling rights on federal lands.

With increasing US (and other countries) production and doubts concerning OPEC unity below the surface, there is not much to get excited about on the upside right now in spite of seasonal fluctuations in stock levels…but there are always the unknown geo-political risks that lurk around every corner - whether it is cyber attacks on industrial control systems, terrorist attacks on plant facilities, or international sanctions, blockades and even hostilities (and not to ignore even the weather with the hurricane season and the US dollar value). I guess here’s enough fundamental stuff to convert even the most adamant fundamentalist trader to charting :smiley:

This is the 1H chart showing the API and EIA rallies, followed by the slump last night and early this morning caused by the increase in US production figures:

The high 5 stop is still at 44.51 - not far away right now (currently 45.00)

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Here is a good graphic of what the oil world is talking about when OPEC and others refer to, compare with, and are concerned about, the 5 year average inventories:

The yellow line is 2017 actual figures

The darl blue is the 2016 actual figures

…and the cloud is the 5-year historical range!

This shows clearly how big the global oil glut is and that it is still far from the OPEC objectives of supply/demand balance.

This was one of those mornings where everything goes right! :slight_smile:

Every chart from Daily down to 5M was negative, but not oversold. Every indicator was shouting sell, and the overall sentiment and long term fundamentals are both negative - and the risk/reward for a sell trade was just right.

I set this for what is maybe my main oil setup on a daytrading basis: 50/50. i.e. 50 pips target and a 45 pips+5 pips spread stoploss. We got there and a “bonus” 1 pip positive slippage from my broker! :slight_smile:

There is probably more on the downside but with a total of just on 100 pips for this (US holiday) week and a 100% trade success, I am stopping trading here for the week on a high note.
This is how the 15m chart looked today so far:


Under the Daily Pivot
Under the (3-ducks) 60 SMA (as is also the 4H and 1H SMA’s)
Under the ichimoku cloud
Green band is also negative (as is also the 4H and 1H bands)
RSI is also negative.

high 5 trade:

As expected this got closed and reversed at the previous 5-day low at 44.51.
This gave only a 9 pip profit compared with a maximum open trade profit (based on closing prices) of +263 pips,

But this was the 6th consecutive high-5 win since I started monitoring this on 2.3. this year and it has gained a nominal cumulative profit of 1727 pips so far!

I would repeat here that I do not actually trade this method for the sole reason that it is a method intended for a portfolio of 5/6 different trending securities and I am only trading Oil. But I follow it and trade in the same direction whenever my own 4H/1H charts agree. I follow the 3-Ducks method in the same way.

But I would like to ask here - is this high 5 method of any interest to anyone out there? I have been updating the high-5 here and will continue to monitor it myself but I won’t bother posting the details here if no-one is actually following it because it is not my own method. and it has its own thread here on BP.

The new high-5 trade is now a short at 44.51 with a stop at 47.29 being the high from 4.7.

OK, well I could say that I would have caught all these oscillations and retired as a millionaire for the weekend! :smiley: :smiley:

But I am sure the truth is I would have given back maybe 100 to 150 pips with these oscillations!

I really don’t know what has been going on here tonight but it is clear that crude oil is in a real state of uncertainty - even the 5 min “scalper” chart couldn’t keep up with this evening!

Too much oil for price to go up but too near production cost breakevens for price to go down! “Where on earth do we go from here?”

It is times like this that one can (and should) we very happy to be a retail trader with no need to take a position at all if one doesn’t have to. Sometimes (maybe even often!) it is better to be sidelined and even sit on one’s hands! This evening is one of those times. We could open anywhere on Monday.

But I wish everyone a very peaceful and positive weekend and may whatever is important to you be fruitful…