Crude oil, like many other commodities and markets are present, continues to remain rangebound with the bullish momentum of earlier in the month now waning. From a technical perspective the ceiling of resistance is extremely well defined at precisely $52 per barrel for the WTI contract and denoted with the blue dashed line on the daily chart. This was the price level that capped the strong move higher on the 10th of the month, with the wide spread up candle touching an intraday high of $52.03 per barrel before closing the session and the day at $51.78 per barrel. This level was duly tested again the following day, as the congestion phase took hold, and now neatly defined with pivot highs and lows to the ceiling and floor, with support building in the $49.50 per barrel level. Should the current ceiling of resistance be breached then $54.50 per barrel is the next logical area of price resistance, but for any sustained move higher volumes will need to pick up dramatically from those at present which remain average for the time being.
Against the technical picture, we have the fundamental aspects to consider, with over supply, weak economics, continued US dollar strength and OPEC supply controls all adding their own weight to the price chart. Indeed at the IEA conference currently being held in Singapore, the executive director, Fatih Birol stated that old demand was likely to weaken further, with global demand only rising by 1.2 million barrels per day, against the current 1.8 million barrels per day for 2016.
The only glimmer of hope comes from China which continues to increase consumption but much against trends for markets elsewhere, but despite this Fatih Birol’s view is that the supply demand dynamic would not be re-established until well into 2017. He also went on to say that in his opinion, OPEC’s planned cuts in supply were unlikely to have much effect in terms as propping up the price of oil for member states, as this would simply drive production higher from other regions in the world, coupled with increased production from the alternative energy suppliers. Altogether a pessimistic outlook longer term for the price of oil, and given the technical picture, $55 per barrel would seem to be the absolute top for the time being, and if the resistance region at $52 per barrel continues to build strongly, then a retracement back to $49.50 per barrel then seems likely with a longer term move to re-engage with the volume point of control in the $47.50 per barrel area in due course.
By Anna Coulling