Crude Oil Archives - Page 15 of 20 - Kase and Company, Inc.

By Dean Rogers

Crude oil continued to rise on Monday as traders anticipate a production freeze that will be discussed by major producers at a meeting later this month. In addition, US production has started showing signs that it is declining. Caution is warranted because the prices rise has become asymptotic, but most technical factors are positive and call for higher prices over at least the next few days.

April WTI confirmed its $28.75 double bottom with the close over $36.28 on Monday. The double bottom’s target is $43.81. This is now a key objective for the relief rally. However, April must overcome a very important $39.2 target before it can make a serious run at $43.8. Most importantly, $39.2 is in line with the 1.618 projection of the wave $28.74 – 34.21 – 30.56. This is a confluent and crucial target because it protects the psychologically important $40.0 level.

Tomorrow odds are 75 percent for $38.7 and 65 percent for $39.2. We expect to see a pullback once $39.2 is met. Without further help from underlying fundamentals, WTI may be hard pressed to overcome $39.2 over the next few days.

Look for support at $37.1 and $36.2. These are Monday’s midpoint and open. $36.2 should hold tomorrow. A close below this has 25 percent odds. This would indicate the move up may be in trouble and that a more significant correction to $35.2 and lower is underway.

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

March WTI pulled back from its $31.53 swing high made in early trading Tuesday after several nations, including Saudi Arabia and Russia, agreed to freeze production at current levels.

While this might be a step in the direction of a long-term recovery, halting output at current levels would do little for a market that is already oversupplied.

In addition, and most importantly, the deal is strapped with a major caveat: Iraq, Iran, and other large producers would also have to halt production increases. Reports indicate that Iran has balked at the idea of halting production levels as they aim to return their output to presanctions levels.

Regardless of the reasons for the move up, from a technical standpoint, the outlook for oil remains weak. WTI was due for a correction when the 1.382 projection of the wave $34.82 – 29.4 – 33.6 was met at $26.05. There were also plenty of positive technical factors leading into the correction. However, the move up stalled at $31.53 when several intraday momentum indicators, including KaseX, triggered overbought signals. In addition, $31.53 was near the 62 percent retracement of the decline from $34.82 to $26.05.

Prompt month March futures have already retraced 50 percent of the move from $26.05 to $31.53. March is now poised to test support at $28.3. This is Friday’s midpoint and near the 62 percent retracement. A close below $28.3 would call for $27.3, Friday’s open, and then $26.7, the last target protecting the $26.05 low.

There is an outside chance that the move up could continue, and corrections of such a swift decline are bound to take place. Prices must overcome at least $30.5 to show the upward correction will possibly extend to $32.1 and higher.

By Dean Rogers

Fears of a persistent supply glut still weigh heavily on the minds of traders. In addition, media reports stated that last week Saudi Arabia slashed prices on its highest-quality crude oil destined for Europe and Asia. Some are interpreting this as a signal that Saudi Arabia is still willing to deal with low prices, therefore, production cuts will not take place any time soon. A weaker U.S. dollar could support WTI, but the charts tend to indicate key support will be tested in coming days.

Last week’s brief rally on Wednesday was reportedly fueled by the declining dollar. However, the move stalled on Thursday and prompt month WTI futures have fallen to $29.57 so far. This is just above crucial support at $29.4, and the near-term outlook hinges on whether or not this objective holds.

A move below $29.4 would take out the wave $27.56 – 34.82 – 29.4 and its potential to extend to $33.9 and higher. In addition, a close below $29.4 would call for at least $28.2, the last support level protecting the $27.56 contract low. Odds favor a decline to $28.2 because prices have already closed below the 0.618 projection of the wave down from $34.82.

That said, the move down will continue to be a grind. Resistance at $30.8 and $31.4 may be challenged before prices fall below $29.4 and extend to $28.2. We expect the latter to hold. A close over $31.4 would call for $32.8, which then connects to key resistance at $33.9.

By Dean Rogers

Last week, speculation that a possible meeting next month between Russia and OPEC to discuss production cuts fueled WTI’s price rise. This would be the type of transition that needs to take place for oil prices to recover over the course of the long-term. However, many are skeptical, and some reports indicate that this may be nothing more than verbal attempts to keep prices from aggressively sliding lower.

The market’s hesitance to push higher became evident on Thursday when March WTI stalled just above the $34.4 projection of the wave $27.56 – 32.74 – 29.25. The pullback from $34.82 formed a blow-off high and Friday’s evening star setup was confirmed by Monday’s decline. WTI has already retraced nearly 50 percent of the move up, and is poised to continue its decline.

The move down has been confirmed by KaseX sell signals (purple diamonds), and WTI is now sitting just above crucial support at $31.1. This is a highly confluent wave projection and retracement. A close below $31.1 would call for $30.3, and at best, would indicate prices are going to settle into a trading range while the market sorts itself out. Given the magnitude of Monday’s decline, WTI could be hard pressed to hold $31.1 and $30.3.

Trading has been erratic over the past two weeks, and last week prices also pulled back significantly to test support at $29.25 early in the week. There is an outside chance that the move up will continue, but for now, we expect that Monday’s $32.7 midpoint will hold. A close over $32.7 would call for $33.5 and possibly $34.4 again.

By Dean Rogers

WTI’s rally from $27.56 late last week was sparked by a few positive technical factors such as a daily bullish engulfing line and momentum divergence. These are factors that would normally accompany a major turn. The move up was a bit over exuberant though, and has stalled at $32.74. Major support at $29.6 is already being tested, and it looks like the rally might be short lived.

Technicals will generally lead the way when a turn is taking place. However, markets, especially the energy markets, have a propensity to overcorrect after being so deeply oversold. To sustain the move higher a shift in the underlying fundamentals must take place. Given today’s pullback, it looks like the market is doubtful that will be the case. The move up is not doomed (yet), but major support is being already being challenged.

The rise from $27.56 unfolded as five-waves that stalled at $32.74, the trend terminus (Y^3/X^2) of Wave I. The decline from $32.47 might be a three-wave correction. However, prices are testing major support at $29.6. A close below $29.6 would call for $28.6 and then a retest of the $27.56 low.

Give the confluence of support at $29.6 a test of resistance could take place early tomorrow. First resistance is $31.1. However, WTI will need to close over $31.8 to have a shot at moving higher again later this week.

By Dean Rogers

China’s stock market plunge wreaked havoc on stock and commodity prices around the world last week. Fears of a further slowing economy in the world’s largest energy consumer along with weak manufacturing demand and the deepening global supply glut have recast a negative outlook on oil prices. The negative sentiment has been reflected in the technicals too as prices continue to fall.

February WTI fell to $30.88 on Monday and came close to meeting a crucial confluence point at $30.6. This is near the 0.618 projection of the wave $38.39 – 32.1 – 34.34, and is the last support protecting against a decline into the $20s. A close below $30.6 would call for at least $29.0 and likely $28.1. The latter is the 1.00 projection for the wave down from $38.39.

The KasePO PeakOut (green P) indicates Monday’s $32.2 midpoint might be tested early Tuesday, but we expect this level to hold. Other than the intraday PeakOut there is little to no technical evidence that the decline is going to stall. Therefore, without some type of unexpected shift in the underlying fundamentals and/or technicals we expect to see prices fall into the $20s soon.

By Dean Rogers

February WTI turned lower again on Monday and gave up just over 50 percent of its pre-holiday weekend gains that it had made on the move up from $35.35. The supply glut is still a concern and reports of Iran stating that exports are ‘priority’ after sanctions are lifted has put a dose of reality back into the long-term outlook for oil.

Technical factors reflect the negative near-term outlook. Monday’s close below $37.0 completed December 24’s evening star and indicates the decline should continue. WTI oil prices should now test the evening star’s $36.5 confirmation point. This is also the 62 percent retracement of the move up from $35.35 to $38.28. The $36.5 target is crucial, and it will be important for WTI oil prices to close below $36.5 within the next day or so to confirm that the move down is going to continue. A close below $36.5 is expected and would open the way for $36.1 and $35.2, both of which are confluent wave projections.

The decline may be a grind lower and small corrections will likely take place, especially if gasoline prices start to rise again. Monday’s $37.4 midpoint should hold, but the key level for a renewed surge higher is $38.0. A close over $38.0 would call for at least $39.6.

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.

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.

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.

By Dean Rogers

The darkest hour is just before the dawn. It is a phrase that most are familiar with that provides hope, even in the worst of circumstances. The outlook for WTI crude oil prices has been “dark” in recent weeks, and the longer-term outlook is still dim. However, December 14’s close over $36.13 provides a small shimmer of hope that a correction might finally be underway.

January WTI met a confluent and structurally crucial support target near $35.0 on December 14 and closed above December 11’s $36.13 midpoint to form a bullish piercing pattern. The piercing pattern is an early indication that a sustainable correction might finally be underway. A close over the pattern’s $36.63 confirmation point (December 11’s open) would call for at least $37.9, the 38 percent retracement from $43.46 to $34.53.

The move up will most likely be corrective, but a substantial correction is long overdue. KaseX is not showing any signs of a turn yet, and the piercing pattern’s $36.63 confirmation point was tested and held. This dampens the likelihood of a reversal, but does not wipe out the potential completely. A close below $35.4 would negate the piercing pattern and call for the decline to continue towards the December 2008 perpetual swing low of $32.4.

Therefore, if the sun is going to rise $35.4 must hold and January WTI will need to close over $36.63 and then $37.9 within the next few days.

By Dean Rogers

January WTI futures met crucial support at $40.41 early Monday. This was the 1.00 projection for the wave $52.02 – 43.52 – 49.23. The subsequent move up was initially promising for bulls, but stalled at $42.75 before it could overcome $43.2 resistance.

It is a tight call tomorrow, but we expect a test of $40.9 before the move up continues. This is confirmed on the intraday charts by the latest KaseX weak short signal (pink triangle). Support at $40.9 is near the 0.618 projection of the wave $42.75 – 41.09 – 42.62 and the $41.09 swing low. A close below $40.9 would call for $40.0 and possibly lower.

Conversely, not all hope is lost for the upward correction to extend. The daily chart’s Kase Easy Entry System (KEES) permissions shifted from first class short (pink dots) to second class long (light blue dot). Therefore, there is still a reasonable chance for a close over $43.2 and an upward correction to $43.8, the 38 percent retracement from $49.23 to $40.41. A close over $43.8 would significantly increase the probability for an extended move to test major resistance levels.

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

Crude Oil Forecast: April WTI Confirms Double Bottom

Tag: Crude Oil