Is the oil market turning bullish?
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