Crude Oil Short-Term Forecast – August 7, 2018

WTI Crude Oil

WTI crude oil is trading in an extremely indecisive manner and appears to be waiting on external factors to feed its next move. However, based on the charts and quantitative factors, near-term odds favor a test of at least $68.7 and possibly $68.0 after today’s failed attempt to overcome $70.0 left another long upper shadow on the daily candlestick. The $68.0 target is an important wave projection, retracement, and the 50-day moving average so it is a probable stalling point, at least initially. Settling below $68.0 would open the way for the next leg lower to challenge $67.2 and $66.5.

That said, until prices fall below the $67.87 swing low, which is also in line with the $68.0 target, there is still a reasonable chance for the wave up from $66.92 to extend to $70.4. More recent waves show the connection to $70.4 is made through $69.6, so a close above this would substantially increase odds for a test of $70.4. Even so, key resistance and the gateway for a bullish outlook is $71.2, a level that is still expected to hold, for now.

Brent Crude Oil

Brent’s move up today was a bit bolder than WTI’s but still stalled below $75.1, the 50-day moving average and last level protecting the $75.79 swing higher. The later move up from $74.14 also failed to overcome today’s high and the late pullback setup a wave that projects to $73.9 and lower. Tomorrow, look for a test of $73.9 before prices possibly attempt to reach $75.1 again. A move below $73.9 would call for $73.1, key near-term support, a close below which would clear the way for $72.5 and lower.

Resistance at $75.1 needs to hold on a closing basis for near-term odds to remain in favor of a deeper pullback. Otherwise, settling above $75.1 would call for $75.6 and $76.3. The latter is the gateway for a long-term bullish outlook as discussed in our weekly Commentary and is expected to hold.

This is a brief analysis for the next day or so. Our weekly Crude Oil Forecast and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil

WTI’s corrective wave formation still calls for $67.0. However, today’s high of $66.7 was in line with the upper trend line connecting the $65.69 and $66.24 swing highs. It is also becoming clear that the move up forms a bearish flag. Therefore, while there is still the threat of testing $67.0 and possibly $67.7 (confirmed double bottom’s target), near-term odds have shifted back in favor of a continued decline.

Tomorrow, look for a test of initial support at $65.8, a move below which would call for the flag’s $65.0 lower trend line to be challenged. Settling below $65.0 would be quite bearish and open the way for $64.1 and lower.

That said, a move above $66.5 before prices fall to $65.8 would call for $67.0 to be challenged. Resistance at $67.0 is expected to hold due to the confluence of wave projections and retracements at that level. Settling above $67.0 would call for $67.7 and possibly higher, though this would likely indicate a significant bullish shift in external factors.

Brent Crude Oil

Brent’s near-term outlook is still weaker than WTI’s and has more downside room to extend since WTI led the move down in late May. Brent’s wave down from $77.61 is in position to challenge at least $75.0 and likely $74.5 tomorrow. The latter is most important because it is the 50-day moving average, a close below which would call for a new low of at least $73.7 and eventually $73.1.

Resistance at $76.5 is expected to hold, though the key level for the near-term is $77.3. A close above $77.3 would call for the most important near-term resistance at $77.9 to be tested.

This is a brief analysis for the next day or so. Our weekly Crude Oil Forecast and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil

WTI crude oil’s trend remains bullish but is still showing signs of exhaustion. Daily and weekly momentum indicators are overbought and setup for bearish divergence, the weekly candlesticks continue to form long upper shadows, and before yesterday’s rise to a new high the daily chart formed a series of spinning tops, a shooting star, and an evening star. The challenge is that reversal patterns like these have been set up for the past few weeks or continue to form, but there has been no follow-through to confirm the patterns.

Today’s pullback and test of yesterday’s $71.9 midpoint provides another opportunity for WTI crude oil prices to follow-through on a much-needed correction. The small waves down from $72.9 call for a test of Monday’s $71.5 open, a close below which would call for $70.9 and possibly lower.

Even so, relative odds (based on the number of times a target is found within our analysis) indicate $70.9 will probably hold and that the move up should extend to $73.2 soon. A move above $72.6 before $71.5 is met would shift near-term odds back in favor of $73.2. This target has the highest relative odds, and due to its confluence is another potential stalling point for WTI. Settling above $73.2 would open the way for $74.4 and higher.

With all factors considered, look for a test of at least $71.5 and possibly $70.9 tomorrow. Support at $70.9 should hold and until proven otherwise the move up will likely extend to $73.2. Therefore, at this point, any pullback will likely be corrective and could provide a buying opportunity for traders that have recently taken profit or missed the opportunity to add to long positions Monday.

Brent Crude Oil

Brent crude oil formed a double top at $80.5 and today’s shooting star reversal pattern setup calls for a test of at least $78.9 tomorrow. A close below this would confirm the shooting and open the way for a test of the double top’s $78.1 confirmation point. This is key support for the near-term, a close below which would call for an extended downward correction to $77.2 and possibly lower (the double top’s target is $75.7).

Brent Crude Oil - Double Top
Brent Crude Oil – Double Top

That said, reversal patterns like the double top and shooting star have been set up repeatedly and failed during the past few weeks. In addition, relative odds indicate that any move down right now will most likely be corrective and that eventually, prices should rise to $81.6. For now, though, $80.0 should hold and key resistance is $80.5. A close above $80.5 would shift near-term odds back in favor of a continued rise to $81.6.

This is a brief analysis for the next day or so. Our weekly Crude Oil Forecast and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

WTI Crude Oil Forecast

Late last week, June WTI crude oil broke higher out of a daily bullish flag. This week’s crude oil price forecast indicated there was still a crucial target at $70.1, but this objective was overcome with relative ease Monday. Today’s corrective pullback stalled at $67.63 before settling the day at $69.06. This was just above the upper trend line of the bullish daily flag, and this afternoon prices are already nearly $1.00 higher and have overcome the key 62 percent retracement of the decline from $70.84. Therefore, the outlook remains bullish and the move up is still poised to extend.

The wave formations up from $67.63 indicate WTI should challenge at least $70.6 and likely $71.1 tomorrow. This afternoon’s bullish sentiment (which is purportedly based on external factors) could also drive prices to $71.7 and even $72.8, especially if prices rise above $71.1 early.

WTI Crude Oil - Daily Bullish Flag
WTI Crude Oil – Daily Bullish Flag

That said, when external factors and bullish sentiment are driving the market prices tend to become over exuberant and can overshoot reasonable objectives. While $71.1 and $72.8 make technical sense for the near-term, anything above $72.8 without a reasonable pullback first would warrant caution of a spike type scenario that could reverse very quickly.

For now, look for support at $68.6 to most likely hold with the key threshold at $67.9. A close below the latter would indicate the move up has failed and would open the way for a larger downward correction to $66.8 and lower.

Brent Crude Oil Forecast

Although Brent formed a bearish daily hanging man, prices have risen over $1.00 this afternoon after settling at $74.85. The wave formation up from $73.1 is poised to reach at least $76.8 and likely $77.8 tomorrow. A close above the latter will open the way for $78.6 and $79.9.

That said, the bullish sentiment driving prices higher this afternoon (see WTI’s comments above) could push prices too high too fast, causing a spike type scenario that could quickly reverse. Therefore, caution is warranted on any move above $79.9 over the next few days without a reasonable pullback first.

For now, support at $74.2 should hold, though prices will have to drop below the $73.07 swing low to indicate the move up has failed. In this unlikely case, look for a larger downward correction to $71.7 and possibly $70.8.

This is a brief analysis for the next day or so. Our weekly Crude Oil Forecast and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

Outlook for WTI

WTI crude oil’s decline wiped out yesterday’s bullish morning star setup and fulfilled the $61.5 larger than (1.618) target of the wave $66.66 – 63.67 – 66.3. If the move down from $66.66 proves to be a three-wave correction the $61.25 swing low should hold. However, as of this afternoon, there is no definitive evidence this will be the case (though an upward correction might take place first as discussed below).

Odds favor a continued decline and a close below $61.2 will open the way for $60.8, $60.2, and $59.3. The next major objective is $58.0, the trend terminus and XC (2.764) projection of the aforementioned wave down from $66.66.

March WTI Crude Oil - Daily
March WTI Crude Oil – Daily

That said, there is a reasonable chance the move down from $66.66 will transmute into a five-wave formation that just completed Wave III at $61.25. If this is the case, then an upward correction to form Wave IV should take place first. Today’s $62.9 midpoint is expected to hold, but the key level is today’s $63.9 open. A close over this would be an early indication that the corrective move down may be complete.

Outlook for Brent

Brent crude oil fulfilled the $65.2 larger than (1.618) target of the wave $70.78 – 67.81 – 70.02 when prices fell to $65.16 today. This is a potential stalling point, but there is no definitive technical evidence that indicates the move down will stall.

If the move down from $70.78 is a three-wave correction of the larger scale move up, then $65.16 should hold. However, this is doubtful because Brent has settled below the $65.6 smaller than (0.618) target of the sub-wave $70.02 – 66.53 – 67.72. This means that this wave should extend to at least its $64.2 equal to target. A close below $64.9 would open the way for $64.2, which then connects to $63.0 and $62.0. The $62.0 target is the next major objective because it is the trend terminus and XC (2.764) projection of the wave down from $70.78 and the larger than target of the wave down from $70.02.

With all of that said, there is a chance the wave down from $70.78 is Wave I of a five-wave pattern that completed Wave III at $65.16. In this case, an upward correction to form Wave IV should take place first. Today’s $66.4 midpoint is expected to hold upon such a correction. Key resistance is today’s $67.2 open.

This is a brief analysis for the next day or so. Our weekly Crude Oil Commentary and daily updates are much more detailed and thorough energy price forecasts that cover WTI, Brent, RBOB Gasoline, Diesel, and spreads. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

The U.S. rig count rose by 17 last week, and according to the EIA, U.S. crude oil supplies have reached 490.7 million barrels, the highest reported level for this time of year since 1930. In addition, the U.S.’s repeal of the 40-year oil export ban could ultimately encourage more pumping from domestic crude oil producers and narrow the WTI-Brent spread closer to parity in coming weeks. This is possibly good news for domestic producers, though it will take months and perhaps years before we will truly know. Overall, it is being reported that these factors could prolong the supply glut that is projected to last through the end of 2016 and possibly beyond.

The narrowing WTI-Brent spread is a being driven by WTI’s deeper contango versus Brent. In January 2015, the two grades were trading near parity, and it looks like this will be the case again in early 2016. This is encouraging for some U.S. producers as the spread could extend into positive territory where $2.60 is a confluent projection. However, longer-term, a narrow spread would likely lead to increased U.S. production, which would be negative for WTI. Conversely, a positive spread could encourage Brent producers to cutback, thus spurring both grades higher over the course of the longer-term. The key will be seeing whether or not the spread becomes positive and remains that way for the next few months. If so, it could lead to a longer-term shift in production strategies, and ultimately prices, world-wide.

WTI-Brent-Spread

Another factor to watch right now is the calendar spreads and the cost of carry. The six-month average cost of carry narrowed a bit for WTI and Brent last week, but remains volatile. Typically, a carry above approximately ($0.50) encourages those with storage to buy oil now, store it, and then sell it at a later date when prices are higher (due to deep contango). This is fundamentally negative because supply rises. The six-month average costs of carry for WTI was ($0.93) and for Brent ($0.79) as of Friday’s settlement.

CostOfCarry

The technical agree with the negative fundamental and spread factors right now. Most momentum indicators are oversold and setup for divergence on the weekly and daily charts. Therefore, a correction might take place soon. However, until a swing low in both price and momentum are made look for the decline to continue. Over the next day or so we expect WTI to fall to $35.0 and for Brent to challenge $35.6. Both are crucial targets to connect to much lower levels as discussed in our full weekly analysis.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested in learning more, please sign up for a complimentary four-week trial.

By Dean Rogers

For the past few weeks each bit of positive crude oil news or fundamental data has seemingly been offset by something negative. As a result, November Brent has settled into a rectangle formation with boundaries between $47.0 and $50.3.

The upper boundary of the rectangle is poised to be challenged after Monday’s move up to $49.87. The pullback at the end of the day indicates another oscillation lower might take place first, but for now, odds still favor a break higher. A close over $50.3 would call for at least $51.7.

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Conversely, Brent’s move up has already failed once after breaking higher out of a bullish pennant on September 15. Since then the rectangle has formed. Should the rectangle fail, and prices close below $47.0, look for at least $45.3.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.

By Dean Rogers

Last week we stated WTI and Brent would likely settled into trading ranges while sorting out longer-term fundamental factors and the late August price surge. That has been the case, and so far the oscillations have formed a flat descending triangle for WTI and a pennant for Brent.

WTI and Brent patterns

Both patterns are bullish, but have a higher than normal probability to fail in our opinion. Even upon a break higher we do not expect a bullish rally to ensue, but rather a test of the recent swing highs.

Should the patterns fail look for major support at $42.6 for WTI and $46.7 for Brent. In other words, we think the trading range will continue to form between approximately $42.6 and $49.0 for WTI and $46.7 and $52.0 for Brent.

This is a brief analysis and outlook for the next day or so. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.

By Dean Rogers

Many market participants are skeptical of Brent’s meteoric rise over the past three days. However, there is no denying the positive technical factors that indicate a bottom has likely been made. The monthly morning star setup and hammer, weekly bullish engulfing line, and daily three white soldiers candlestick patterns are reliable reversal patterns. KaseX also triggered reversal signals (gray arrows) early last week.

Brent Oil

Brent is on the teetering edge of confirming a sustained bullish outlook and has risen to the 50-day moving average at $54.47, the 38 percent retracement from $71.68, and the upper standard deviation band. A close over $54.5 will confirm a positive outlook and call for $55.4 and higher.

That said, because of the confluence of technical resistance at $54.5 this is a very likely stalling point. We expect a test of support at $51.9 within the next few days and likely before Brent closes over $54.5. A close below $51.9 would call for $50.6 and $49.7. The latter must hold for the near-term outlook to remain positive.

This is a brief Brent oil forecast and outlook for the near-term. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.

By Dean Rogers

On Friday evening I sat down to write Kase’s detailed weekly forecasts on WTI crude oil and Brent with an image of Chicken Little running around warning all of his pals that the sky is falling. This is a feeling that resonated with many market participants around the world as stock indices and commodities have plunged lower.

The reality is WTI and Brent will find a bottom soon, and there are logical/technical points at which these bottoms could form. From a technical standpoint, WTI crude oil is already well oversold and due for a correction. There are daily and weekly divergence setups on many momentum indicators, including our own KaseCD and KasePO, but this has been the case for weeks. Therefore, until a significant retracement takes place, reversal patterns form, and the daily and weekly momentum divergences are confirmed, the outlook will remain negative.

WTI met major support at $37.9 when it fell to $37.75 early Monday and settled at $38.24. Given today’s price action though, it looks as though the decline is going to continue to extend. WTI pulled back to $39.5 where an intraday double top formed, and the pattern was confirmed when prices fell below $38.3. The projection for the double top is $37.1. Look for at least $37.52, the 1.618 projection of the wave down from $39.5, and then $37.1 tomorrow.

crude oil

The small pullback from $37.83 may extend to $38.45 and even $38.88 first. The 38 percent retracement of the decline from $39.46 to $37.83 is $38.45 and the 62 percent retracement is $38.88. The latter is also the 0.618 projection of the wave up from $37.75 and is expected to hold. A close over this would call for an extended upward correction.

This is a brief analysis and outlook for the near-term. Our weekly Crude Oil Commentary is a much more detailed and thorough energy price forecast. If you are interested, please sign up for a complimentary four week trial.