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.
2) 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!