Wednesday, 28 September 2016

Crude Oil Price Forecast: Oil Drops

Crude Oil Price Forecast: Oil Drops on Signs of Failed Accord 
Talking Points:  
  • Crude Oil Technical Strategy: Short bias remains as falling resistance favors move to $43/bbl  
  • Supply glut may get worse as IEA favors imbalance through late 2014  
  • US Dollar continues sideways, which takes out a component of downward price pressure  
The last week of Q3 has all focus on the OPEC and Russia meeting in Algiers. The Federal Reserve announcement did little for the US Dollar as many now see even the likelihood of one rate hike as a fading possibility. Now, Algiers may be a disappointment for Oil Bulls as the FOMC meeting on September 21 were to US Dollar Bulls as Iran has said they are not going to freeze output at the current level, and Saudi is not interested in freezing production alone.  
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While much focus is now on the outcome of the OPEC meeting in Algiers, and the following meeting in November where rumors will likely run rampant once again. However, on Tuesday, IEA came out with a warning that oversupply will exceed demand until late 2017. Traders will likely keep this warning in their back pocket and look for a possible failed-OPEC accord alongside DOE data on Wednesday to show a further build to increase further bearish bets on Oil.  
The chart above shows competing technical stories. As explained earlier, the fundamental pressure appears to be for a push lower. Only a reversal of main themes such as a weak US Dollar, Oversupply, OPEC failed accord, followed by a price breakout above $50/bbl should turn trader’s attention toward the bullish mindset of Q2. The competition comes in the form of a potential bullish head and shoulders pattern that would activate an upside bias on a daily close above $50/bbl. 

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