Daily Crude Oil Analsys

WTI Crude – Intraday Trade Plan

WTI Crude intraday trade plan

Feb 7th 2017 Updated at 2:18 am EST on Feb 7th 2017

WTI Crude continues a sideways-to-down trickle down, without an overwhelming clear signal on trend. I’d written for yesterday: I see some support at 53.80~53.90 and then a better support line at 53.50~53.40 possibly having the clout to hold the downside for today. If the bears decide against this and want to push this lower with sufficient volume, we may head to below 53.30 to perhaps the best chance of LOD at 53.00~52.90. We sold off to give up almost 3 days of gains & test the best support for the day at 5300/5290. We bottomed exactly here and I wish myself that I had stayed with my shorts taken in the premarket in the 53.90 region.

Holding strong support at 53.00~52.90 (which is looking seemingly difficult here as I write) will perhaps allow us to go tag 53.30 and then initial resistance which isn’t too far above at 53.45~53.55. I would consider this to potentially be a the HOD print. If the bulls elect to call this push downwards enough we will likely target 53.75~53.85 and then run into some serious resistance at last week’s high of 54.35~54.42 as there is nothing holding it down in between. Above here is positive this week revisiting 54.70 then the January high at 55.15~55.24.

WTI Crude yesterday, tested the best support for today at 53.00~52.90. I continue to recommend trying longs with stops below 52.65. If we break lower, it would be time to reverse as it will be signaling the fact that we perhaps tag minor support at 52.35~52.25 and with good volume continue the slide then to 51.85~51.75. Failure below here establishes a trend lower and I would be looking for good support at 51.30~51.20 for profit taking on shorts.

Pivots for Feb 7th, 2017

R3=54.09 | R2=53.66| R1=53.39 <-> S1=52.87 | S2=52.60 | S3=52.17

WTI Daily Chart

screen-shot-2017-02-07-at-9-06-37-am

Oil is becoming a crowded trade as hedge funds pile in: (commentary by John Kemp – Reuters News)

Feb 7th 2017 Updated at 2:55 am EST on Feb 7th 2017

Hedge funds have accumulated a record bullish position in crude futures and options, betting on further price rises, but the lopsided nature of the positioning has become a key source of risk in the oil markets.

Hedge funds and other money managers had accumulated a record net long position in the three main Brent and West Texas Intermediate (WTI) futures and options contracts equivalent to 885 million barrels by Jan. 31. Fund managers added an extra 41 million barrels to their net long position in the seven days to Jan. 31, according to the latest reports published by regulators and exchanges. Funds now have long positions equivalent to almost 1 billion barrels across the three major contracts, while short positions amount to just 111 million barrels.

The ratio of long to short positions has reached almost 9:1, the most bullish since May 2014, when Islamic State fighters were racing across northern Iraq and the Libyan civil war had halted crude exports. The crude market is starting to resemble the classic crowded trade in which speculators attempt to position themselves in the same direction in anticipation of a big price move. There has been no sign of profit-taking although Brent prices have risen close to the $55-60 region most energy market professionals expect to be the average for 2017. Hedge funds have continued to add long positions even though Brent prices have almost doubled over the last 12 months and are trading near the highest level since July 2015.

And there is no evidence of any new wave of short sales. Combined short positions across Brent and WTI have fallen to the lowest level in seven months. Fund managers apparently believe output reductions by the Organization of the Petroleum Exporting Countries and other exporters will succeed in draining excess global inventories and pushing prices higher. Managers are also discounting the threat from renewed drilling in the United States and a likely increase in output from shale producers, at least in the near term.

But every successful trade needs an exit strategy and in this case, it remains unclear how and at what price fund managers will manage down positions and try to take profits. The enormous concentration of hedge fund long positions has emerged as an important source of price risk in the near term.  One-way markets, when traders attempt to position themselves in the same direction, often precede sharp reversals in prices.

The previous record net long position in oil markets, set in June 2014, preceded the deepest and most prolonged slump in prices for almost 20 years. And in the last two years, large concentrations of short positions have normally preceded a sharp short-covering rally as managers raced to lock in profits when prices stopped falling.

With so many fund managers now positioned in the same (long) direction, the risk of a rush for the exits, a disorderly liquidation of positions and a correction in prices has risen significantly.

 

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