Daily WTI fundamental and technical analysis


my name is Michael and I will be posting my daily fundamental and technical analysis for West Texas Intermediate (WTI) oil here.

If you have any questions or suggestions, please let me know.

[B]WTI bears are back[/B]

WTI continued to move lower after the substantial build (increase) in total crude oil inventory yesterday. The bears are once again back in the market as the oversupply issue comes back in focus. However, there was a late pullback on the Rig Count, which showed an additional 15 rigs have been taken offline.

The Nigerian oil minister stated yesterday that a production freeze could be agreed at next month’s meeting between OPEC and non-OPEC members. This is news for the bears as a production cut is the only solution to the oversupply issue. *

United States (U.S) core durable goods orders came in lower than expected showing the negative effects of a stronger dollar and lower oil prices on the manufacturing sector.

U.S. jobless claims came in positive showing a strong labour market. This will further boost confidence for a Fed rate hike at the next meeting. * *

The 200 SMA (Simple Moving Average) is currently at $41.88 with the initial support level at $38.47. If the market breaks this level then we could see a further drop to $34.25

[B]What to expect tomorrow?[/B]*
Inflation data out of Japan, U.S. quarterly Gross Domestic Product (GDP) data and the Commodities and Futures Trading Commission’s (CFTC) commitment of traders West Texas Intermediate (WTI) positions.

Japanese inflation data will give indication of well the economy is holding up against a global slow down. U.S. GDP will be carefully watched as any negative data will weigh heavy on international markets. CFTC positions will likely show an increase in long positions.
Japan Tokyo Core CPI (Year on Year) forecast -0.2%
Japan National Core CPI (Year on Year) forecast 0.1%
U.S. GDP (Quarter on Quarter) forecast at 1%

Unconfirmed news came out that the Iraqi oil minister resigned today. *

[B]The oil bears are back[/B]

WTI pulled back below the the psychological $40.00 level on record breaking crude oil stocks. *

The weekly United States (U.S) Department of Energy (DoE) oil report showed a substantial increase in total crude oil stocks, which stand well above 500 million barrels in storage around the United States. There was a significant drawdown (reduction) in gasoline stocks, one of the reasons the market has been rallying. However, it seems the strong demand for gasoline is not enough to help the market this year. As supply continue to increase each week at record numbers.
Manufacturing data out of Japan and the U.S. came out negative, an indication that global growth concerns, China’s slowdown and the stronger dollar are here to stay for a while. There was some positive news for the U.S. labour market with unemployment claims coming in below expectations. The labour market has supported the dollar and the expectation that the next Fed meeting will result in the first rate hike of the year. A stronger dollar will put pressure on the oil market.

WTI has strong resistance at the 200 Simple Moving Average (SMA) around the $42.00 level. The market has been below the 200 SMA for more than 400 days, now the longest period on record. Initially support at $38.47 and break below will take the market down to $34.25

[B]What to expect next week?[/B]
Friday will see manufacturing data out China, Japan and the U.S., as well as, labour figures. All of this should make for a big market moving day.

Japan Tankan Large Manufacturing Index previous 12
Japan Tankan Large Non-Manufacturing Index previous 25
China Manufacturing PMI previous 49
China Caixin Manufacturing previous 48
U.S. Non-Farm Payrolls forecast 205K
U.S. Unemployment rate forecast 4.9%
U.S. Manufacturing PMI forecast 51

[B]WTI moves lower on light volume[/B]

WTI pulled lower on light Easter trading volume. The first week of each month brings high impact data to move the market. Traders will be looking at manufacturing, labour and inflation data out of China, Japan and the United States (U.S). Financial markets want to know the condition of the global economy and when the Fed (U.S. Central Bank) will raise interest rates. The answers to these questions will be answered on Friday.

Oil traders want to see OPEC and non-OPEC producers take further actions to stabilise the market by cutting production. Russia has been the only country to suggest a production cut. The production freeze pulled the market back up to $40’s but will not be enough to keep the momentum. Be on the looking out for OPEC and non-OPEC producers suggesting a production cut and not a freeze. * *

The 200 SMA (Simple Moving Average) is currently at $41.78 with the initial support level at $38.45. If the market breaks this level then we could see a further drop to $33.94

[B]What to expect tomorrow?[/B]*
Japanese economic data, Fed statements and the API oil inventory report.

Japanese retail sales and household spending will give an indication of consumer growth within the country.

FOMC members Williams, Dudley and Kaplan will be speaking, as well as, Fed chair Yellen. Traders will pay close attention to comments on the next interest rate hike. An increase in interest rates will strengthen the dollar and push the price of oil lower.

The American Petroleum Institutes (API) weekly oil inventory report will be careful monitored for a decline in gasoline and total crude stocks. Unless there is a drawdown (reduction) in both these figures, WTI will most likely move lower.
Japan Household Spending (Year on Year) forecast 3.2%
Japan Retail Sales forecast 1.7%
API Crude Oil Stock previous 8.796 m/b
API Gasoline Stock previous -4.302 m/b
API Distillates Stocks previous -0.391 m/b*

[B]WTI fails on fading hope[/B]

WTI continued to move lower as traders hopes of a production cut deal between OPEC and non-OPEC producers fades. Iran will be attending the meeting in Doha, however the country will not be agree to any freeze on production. The Islamic Republic is intent on increasing production to regain lost market share while under Western sanctions.

The United States (U.S.) dollar is gaining strength on the prospect of an interest rate hike next month. A strengthening dollar pushes the price of oil lower.

Analysts forecast that Chinese manufacturing data (released on Friday) will come in a fraction above estimates but still within the contraction zone. This will be the eighth consecutive month that Chinese manufacturing data has been in decline. Weak manufacturing data indicates a slowing demand for oil and a drop in the price.

The Bank of Japan (BOJ) is expected to expand monetary policy in a continued effort to support the country. Consumer spending remains strong, but the manufacturing sector is being pulled down by a slowing global economy. * *

The 200 SMA (Simple Moving Average) is currently at $41.67 with the initial support broken at $38.45. The market looks set to test $33.94

[B]What to expect tomorrow?*[/B]
Japanese production data, U.S. employment figures and the Department of Energy (DoE) oil report.

Oil traders will be watching the total crude oil stock release. A number indication a further build (increase) in inventory will push the market lower.
Japan Industrial Production (Month on Month) forecast -6%
ADP Nonfarm Employment Change forecast 194K
Crude Oil Inventories forecast 3.167 m/b
Gasoline Inventories forecast -2.392 m/b
Distillate Stocks forecast -0.083 m/b

[B]Total crude oil stocks pull WTI lower [/B]

WTI rallied during the Asian and European sessions anticipating a drawdown (reduction) in total crude oil, gasoline and distillate stocks. The Department of Energy (DoE) weekly oil report came out with a build up (increase) in total crude oil stocks further adding to the record inventory in the United States (U.S). Gasoline and distillate stocks showed a drawdown, however the levels have not been enough to reduce the historic oversupply.

OPEC production levels are showing 100,000 barrels per day (bpd) higher than last month, adding to bearish (selling) sentiment.

A Barclays report has stated that the oil market will be stuck in a $30 - $40 range due to global economic and oil supply factors.

Saudi Arabia and Kuwait have restarted production at the Khafji oilfield. Production at the field was suspend in late 2014 due to environmental reasons. Production capacity is at 600,000 bpd and will add to oversupply. These actions are not in line with the upcoming meeting in Doha and show that Saudi has no interest in cutting production.

Russian actions in Syria are showing that the country is increasing its military presence. This is in contradiction to statements made two weeks ago that military personnel would be taken out of that region. It appears that Russia will use its alliance with the Assad regime as leverage when negotiating with Saudi and Iran on a possible oil production cut.

The 200 SMA (Simple Moving Average) is currently at $41.56. Tomorrow might see a pull back to the $39 level before moving lower.

[B]What to expect tomorrow?[/B]
Traders will be watching initial and continuing jobless claims out of the U.S. ahead of non-farm payrolls on Friday.

U.S. Initial Jobless Claims forecast 265K
U.S. Continuing Jobless Claims previous 259.75K

[B]Weaker dollar supporting WTI[/B]

WTI found some relief from yesterdays sell-off in a weaker United States (U.S.) dollar. Initial jobless claims came out worse than expected pushing the dollar lower and WTI higher. This will be short lived as further bearish news has released earlier today.

OPEC production output rose in March from 32.44 million barrels per day (mbpd) to 32.55 mbpd. This is in direct opposition to the meeting to be held in Doha next month. The purpose of the meeting is to agree on a production freeze and start negotiants on a potential production cut. Russia has been one of a few countries who have openly stated that they will cut production. It seems however that Iran will increase production by another million barrels per day and Saudi has no intention of cutting back.

The 200 SMA (Simple Moving Average) is currently at $41.45. Tomorrows move will be dependent on the high impact economic data.

[B]What to expect tomorrow?*[/B]
Tomorrow will be a big day in the market with high impact data of Japan, China and the U.S. These are the three largest oil consumers and these reports will dictate price action for the upcoming weeks. Traders want to know if the Chinese manufacturing sector will remain in the contraction zone for yet another month. The analysts believe so and this will add further downward pressure on oil. Additionally non-farm payrolls will either push the dollar lower or provide it with a relief rally. The U.S. labour market has remained resilient despite a global slowdown.

Be cautious trading tomorrow as volatility will remain high.
Tankan Large Manufacturers Index forecast 8
Tankan Large Non-Manufacturers forecast 24
Chinese Manufacturing PMI forecast 49.3
Chinese Caixan Manufacturing PMI forecast 48.2
U.S. Non-farm Payrolls forecast 205K
U.S. ISM Manufacturing PMI forecast 50.7

WTI has now turned bearish as the bullish factors are fading. Commodities and Futures Trading Commission (CFTC) data on Friday showed that Managed Money (Hedge Funds) have reduced their net long positions. This is due to headlines stating that OPEC and non-OPEC producers will most probably not find a consensus on production.

Iran has openly stated that they will attend the upcoming meeting in Doha but not agree on any cut in production. Additionally, information has surfaced that Saudi Arabia has restricted Iranian crude exports through its country, as well as, Bahrain. This further shows the relationship between OPEC members and the lack of a production cut agreement.

The Russian energy minister has been busy negotiating with Iran and Saudi to find a compromise. Russia has been the most vocal non-OPEC member, trying to find a way to cut production. The Russian economy lingers in recession and urgently needs a higher oil price.

Statements from FOMC member Rosengen suggested that the Fed is not as dovish as markets have assumed. This has given the dollar support and further statements from Fed chair Yellen later in the week may further boost the greenback. This will add to the oil sell-off.

United States (U.S.) factory goods orders came out negative. Despite strong manufacturing data on Friday, it appears the U.S. economy might be contracting. This combined with a stronger dollar is bearish for oil.

The 200 bar simple moving average (SMA) is at $41.20 and the market looks set to move down to $34.25

[B]What to expect today[/B]
Traders will be eagerly awaiting the American Petroleum Institutes (API) weekly oil report to assess gasoline demand and whether there will be a drawdown (reduction) in total crude oil stocks.

U.S. non-manufacturing data will give some insight into the strength of the economy.

[B]The oil sell off eases[/B]

WTI traded in a thin range throughout the day as OPEC and non-OPEC headlines came out regarding the upcoming meeting in Doha. The Kuwaiti oil governor stated that the production freeze will likely be an average of January and February output. He also mentioned that an agreement can be found between producers without Iran. The meeting will be held in two weeks and there are bound to be contradictory headlines and statements to come. However, this is enough to give the market some support.

Weak economic data out of Europe and the United States (U.S) has pushed the dollar lower giving the oil market further support. A weaker dollar lifts oil prices as they are priced in U.S. dollars. Tomorrow will see FOMC meeting minutes which traders will analyse intensely looking for a sign of the next rate hike.

U.S. data showed that the countries imports exceeded exports by a greater margin than forecast. This has some traders doubting whether the U.S. economy can continue to remain strong in a slowing global economy. Any doubts about U.S. economic growth has a negative impact on the oil price

WTI continues to trade in a bear channel. The 200 SMA (Simple Moving Average) is currently at $41.08. Despite the strong bearish view of the market, I would like for a sharp pullback in price up to $37.50 / $38.00

Traders will be looking to the Department of Energy (DoE) to either continue the bearish move or find a reason to buy the market. A sharp pullback would require a drawdown (decrease) in total crude oil stocks, gasoline and distillate inventories. A more likely scenario will be some active buying on a continue drawdown in gasoline inventories and an expected total crude oil stock release.

American Petroleum Institutes (API) data forecasts
Total Crude Oil Stocks 2.9 m/b
Gasoline Stocks -1.94 m/b
Distillate Stocks -0.095 m/b

Department of Energy (DoE) data forecasts
Total Crude Oil Stocks 3.15 m/b
Gasoline Stocks -0.967 m/b
Distillate Stocks -0.333 m/b

So how are you trading oil, long and short? Oil trading is heavily manipulated, there is no way to know how the string pullers are going to push the news. I look at The API numbers out today, they could be interpreted as bullish by the string pullers. To me oil should not be up with IRAN, the Glut of inventory, and the rise of alternatives. The only true way is to allow the price to find it’s own footing, $30 bucks is where it deserves to be. String pullers have other motives, logic is not what moves the forex market. The US has allowed oil to be exported, perhaps a new report needs to be generated to show how much US oil is being exported.

From my BLOG

Oil inventories fall, previous support becomes resistance?
Oil ripped up the page on a surprise fall in US crude stocks this afternoon with an intra day high of 37.80 on WTI. But will this level hold as a high? The 4 hour wti chart shows that this area was previous support , marked in yellow, which can often then become resistance. There’s also hidden bearish divergence too, as shown. This could well be an area to short again.

[B]WTI pulls back of stock drawdown[/B]

WTI made a positive move today following a drawdown (reduction) in total crude oil stocks in both American Petroleum Institutes (API) and Department of Energy (DoE) weekly reports.

The question now is will the market continue to move higher? Although there was a much wanted drawdown in total stocks, gasoline inventories should a substantial build (increase). This is important because strong gasoline demand is key to reducing the oversupply issue. If we start to see a continued build or weaker than forecast release, the bears will get active.

In OPEC and non-OPEC developments, Russia has stated that a price range between $45 - $50 is acceptable to balance the market. The country is concerned that a higher price will incentivise shale producers to increase production. Additionally, the OPEC Secretary General and Saudi oil minister will meet in Moscow between the 19 - 21 April. Russia is pushing hard to stabilise the market and support an economy in recession.

Services data out of China shows that the economy is pulling back into slight positive territory. However, jobs data is showing that there have been a marked increase in lay-offs. For now the Chinese slump is slowing but still requires extensive government action to get the country back on track.

The 200 bar simple moving average (SMA) is at $40.77, despite the move higher the market remains bearish until a strong close above $39.00

Big day with ECB’s Draghi and Fed chair’s Yellen speaking, watch out for volatile swings in the dollar.

Initial and continuing jobless claims out of the U.S. will add to dollar momentum.

I totally agree, I’m short at 37.50

Can’t disagree, I’m short at 37.50

From my BLOG :

Still happy short oil…for now!
As an oil bear, Tuesday and Wednesday caused some nervousness, but for both Brent and WTI, the price stayed within a level where I’m happy, namely below the middle Bollinger Band on the daily chart. If we’re going to see a sustained new move down, I want to see price stay below the 20 sma, which is the middle band on Bollinger standard settings. As the WTI chart shows, this has happened today, so for now, I’m still happy, but a close above this will see me cover my short. On a longer term basis, many traders use above or below the 200 sma as their definition of trend, and as marked in yellow on the chart it bounces here too.

Looks like it might bounce around heading into next week.

WTI lost some of the momentum after yesterday’s Department of Energy (DoE) total crude oil stock drawdown (reduction) on news out of Iraq and market intelligence firm, Genscape.

Iraqi production showed an increase in output, despite statements that the country is willing to freeze production along with other OPEC members. Further confusing the market which initially rallied on the potential agreement and now seems to be losing hope on any consensus.

Genscape added to the bearish move reporting a build-up (increase) in stocks at Cushing, the central delivery point for crude in the United States (U.S.), in next weeks oil report.

Initial jobless claims data out of the U.S. gave the weakening dollar some support. Continuing claims slipped below forecasts, however, the four week average remains well above the crucial 300K level.

[B]Technicals [/B]
The 200 bar simple moving average (SMA) is at $40.67. The market looks to finish the week above $37’s with support coming from a weak dollar and another drop in the rig count.

A light day to finish off the with some trade data out of Japan, the Baker Hughes Rig Count and CFTC positions.

The rig count will most probably show another record drop in the rig count.

CFTC data will most likely show more reductions in long positions as managed money reposition themselves.

[B]Is the oil market turning bullish?[/B]

There are both bullish and bearish factors pushing and pulling the oil market.

The analysts are forecasting that the oil market will once again move down to the $30 level as demand remains weak and the supply glut persist. There are signs that the manufacturing and service sectors are stabilising in China and data from the Energy Information Administration (EIA) showed a decline in United States (U.S.) oil exports. The weekly Department of Energy (DoE) oil report showed the first drawdown (reduction) in total crude oil stocks this year, giving the bulls incentive to buy. These are positive signs, however, there are strong bearish factors in the market.

Iraq agreed to abide by a production freeze, yet it increased output during the first week of the month. This exemplifies the state of relations between OPEC members who say they are seeking market stability, but continue to add to the oversupply problem.

Market Intelligence firm, Genscape forecast a build (increase) at Cushing, the central devilry hub for U.S. crude, in next weeks DoE oil report.

Managed money (Hedge Funds) have reduced their long positions as uncertainty enters the market.

Taking all these fundamental factors into consideration, the market will be volatile this week with potentially strong intra-day price swings.

WTI continues to trade in a bear channel with the 200 SMA (Simple Moving Average) is at $40.08. The key level to watch this week is $38.50, if the market remains above this market we could see a continued bullish move up to $40.00

I can’t be a bull until I see the world banks singing inflation and raising interests because of it. I can’t be a bull until I see a meaningful decline in the inventory build up. What this means is I will continue to take the short side. I sell into buyers. The real game of the liquidity providers is to run the news bullish to squeeze the shorts out (me) included. Rather than be margined out I padded my account, my sell entry price is 38.80. I will adjust my position up if required to defend my position. Not a good risk/reward play, but preservation of my balance I fight for everyday to increase is my primary goal. If you are trading, what days and times do you trade?

Right now getting out of a short at 39.00 and looking to get long for the summer. WTI is getting ready to rally up to the mid-$40 range.