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