Daily Crude Oil Analsys

Trading WTI Crude on Friday 12/2/16

WTI Crude intraday trade plan

Dec 2nd 2016 Updated at 10:22 pm EST on Dec 1st 2016

For Thursday Dec 1st I’d written “I expect that we continue to grind up in through the Asian and European trading hours into about 50.05 and then targeting 50.20 and from there on to 50.80~50.90. If the bulls are in a hurry to get to the calendar year all-time highs we could be looking for 51.50~51.55…” We hit 51.80 taking out that June high print of 51.67and stayed below this year’s high made not so long ago in October of 51.93.

For the upside forecast today holding above 51.30 allows a retest of yesterday’s high at 51.75~51.80. Above here we have important trend line resistance spanning about 40-tics between 51.90~52.30. Trading between this price area indicates the relentless push by bears to hold that resistance and the desire by the bulls to draw another line in the sand somewhere above here. A weekly close above here would be a big buy signal longer term. Initial targets are 53.15~53.10, 53.50, 53.85~53.90, 54.10~54.15.

While the trend remains bullish, crude has important resistance within a 40-point area that forms between 51.90~52.30. Holding below these numbers means we sway back and forth as we have been between 40~50 for the past 6 odd months. If we are held below 51.20~51.15 we will seek some very minor support at 50.80~50.75. Trading below 50.50 on good volume will have has revisiting short term support at 50.15~50.10, while still not considering this a serious threat to the downside and we will likely halt the downward move here for tomorrow. However on a bearish BHI Rig Counts report we may tag below the November high at 49.90 and risk a slide to 49.65 & the best support for today at 49.60~49.50.  

Pivots for Dec 2nd, 2016

R3=52.04 | R2=51.50 | R1=51.18 <-> S1=50.54 | S2=50.22 | S3=49.88

WTI Crude Daily Chart Analysis


News & Analysis with a focus on early Asian trading

Dec 2nd 2016 Updated at 10:28 pm EST on Dec 1st 2016

Crude futures moderated in early Asian trade on Friday, but market sentiment remains bullish on prices trending higher as major oil producers prepare to taper their production. On the NYMEX, light sweet crude futures for delivery in January traded at $50.88 a barrel at 10.46 pm EST. down $0.18 in the Globex electronic session. February Brent crude on London’s ICE Futures exchange fell $0.34 to $53.60 a barrel, but is up 11% this week so far, buoyed by the OPEC’s decision on Wednesday to pull back their output by 1.2 million barrels a day. Oil prices jumped to a fresh year’s high overnight on reports that leading non-OPEC producers, such as Russia and Oman, have also agreed to reduce their output. The production cut pact is expected to take effect in January and participating oil nations will reassess in six months with an option to extend the accord for another six months. If the deal is fully observed, it could shift the market into a deficit as early as the first half of next year. Brent prices could edge up to average between $55 and $60 a barrel in 2017, said Simon Flowers, chief analyst at consultancy Wood Mackenzie. “However, this does depend on OPEC being very careful to meet the terms of the agreement,” he cautioned.

Skepticism over members’ compliance with production quotas isn’t without ground as members have cheated their quotas in the past by underreporting or producing beyond their allotted limits. Based on a Goldman Sach’s forecast, compliance rate by members this time around is approximately 73% of the target, which would put OPEC’s overall production at 33 million barrels a day. JBC Energy expects compliance to be between 70% to 80% over the first quarter next year, but may tick lower when seasonal demand kicks in April. Crude demand in the Middle East, in particular Saudi Arabia, typically surges in the summer months to meet the increasing need for air conditioning.

But not everyone is impressed by the deal with some questioning the actual effectiveness of the pact. “Cutting production when it is at an all-time high is not very helpful,” said a Chinese oil trader based in Singapore. In October, OPEC production hit a record level at 33.64 million barrels a day. Russia’s production also reached a post- Soviet high at 11.2 million barrels a day in the same month.  Moreover, OPEC’s deal only cuts production but not exports. So, countries with high storage capacity and inventories such as Saudi Arabia will still be able to maintain their market share by drawing down existing stockpiles, while for countries like Iraq with less than two weeks’ worth of oil stocks, a cut “may not be palatable”, said BMI Research. Nymex reformulated gasoline blend stock for January–the benchmark gasoline contract–fell 83 points to $1.5387 a gallon, while January diesel traded at $1.6427, 52 points lower. ICE gasoil for December changed hands at $470.50 a metric ton, down $3.00 from Thursday’s settlement.


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