20 Oct Daily take on WTI crude oil
Daily take on WTI crude oil
This is my daily take on the WTI crude oil market. I will keep these post short and to the point. The purpose of these posts is for me to set up my bias for the day and look for signals to start taking positions.
Sources will be listed at the end.
Click here for my disclaimer. It basically says that I am on my path to becoming a trader and these are just my opinions on how to approach learning to trade. Feel free to check it out and comment on it.
Here it goes…
WTI has positive and negative correlations to other financial instruments and I will list these here to show the reason for my bias. I have three categories: Downward, neutral and upward pressure. Downward pressure means that the items listed have a negative effect on WTI crude oil and is cause for a short-bias and vice versa.
Related Financial Markets
The positive correlated financial markets look positive putting upward pressure on crude oil.
The negative correlated ones look neutral. One up, one down. The dollar is up though, meaning it usually puts some downward pressure on crude oil. Let’s have a look at the related news.
SINGAPORE (Reuters) — Oil prices edged up on Friday, supported by signs of tightening supply and demand fundamentals, although a warning about excessive China economic optimism still weighed somewhat on markets.
The stable prices came after a more than 1 percent fall in prices the previous day.
This was put down to profit-taking following four days of straight gains, but also to a sudden market slump which spooked traders after the veteran but outgoing governor of China’s central bank warned of a “Minsky moment”, a reference to excessive optimism about economic growth fueled by vast debt and speculative investment.
“Oil market has moved into modest under-supply and we expect this will persist at least through the end of the year,” U.S. investment bank Jefferies said.
RBC Capital Markets said, “a strong indicator that global inventories are being run down will be when the market starts relying on U.S. exports to fill deficits.”
Shipping data in Thomson Reuters Eikon shows that overseas U.S. crude oil shipments have soared from virtually zero before the government loosened export restrictions in late 2015 to around 2.6 million barrels per day (bpd) in October.
“Physical bottlenecks are unlikely to kick in until waterborne (U.S.) exports approach 3.2 million bpd,” RBC Capital Markets said.
Exports have been boosted since a production cut led by the Organization of the Petroleum Exporting Countries (OPEC) has been in place since January this year, and which OPEC wants to expand beyond its current expiry date at the end of March 2018.
“Our expectation is that OPEC (and partners including Russia) will extend production cuts through the end of 2018,” Jefferies bank said.
Investing.com — Gold prices drifted lower in Asia on Friday with support from physical demand during India’s festive season failing to aid sentiment and political risk on the back burner.
Overnight, gold prices rose on the Thursday as an uptick in political uncertainty in Spain weighed on risk sentiment while ongoing dollar weakness added to upside momentum in the precious metal.
Sentiment on the gold, however, remained negative as market participants said the precious metal could come under pressure amid signs of solid U.S. economic growth and expectations for a year-end interest rate hike.
Gold is sensitive to moves higher in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion.
Crude oil prices settled lower on Thursday as data showing a larger than expected build-up of product inventories continued to weigh on sentiment.
Crude oil prices fell as signs that Opec would extend the global supply-cut agreement deal failed to offset ongoing investor concerns over data showing a sharp rise in gasoline and diesel supplies.
A weekly report from the Energy Information Administration released Wednesday showed U.S. gasoline stockpiles rose for a fourth straight week while supplies of distillates — the class of fuels that includes diesel and heating oil – increased for the first time since August.
The uptick in supplies of refinery products such as gasoline comes amid a traditional slowdown in refinery activity as refiners undergo seasonal maintenance.
On the 4‑hourly chart we can see that prices have halted at the resistance levels put on by months of bigger timeframe trends. It went back to previous support levels and is now consolidating at this point looking to break again up or down we don’t know. Definitely
As I am writing this prices have gone even more south.
I think prices will stay between the two turquoise support and resistance lines for now. We’d have to see if this is going to be the new support area or if it’s going to break down more. Let’s see if support holds up 50.80.
Adjust and Adapt (evolve)
In the earlier daily takes I did I would go down in timeframes to look for more clues and give you my bias on what direction I think it’s going to go. However, I have come to the realization that it doesn’t really matter. Just stick to your plan on the time frames that you want to trade and trade your plan. Regardless. That’s the main thing you need to learn.
Thank you as always for being a part of my journey into becoming a trader. Please feel free to comment or ask questions. Let me know what you think.