Oil prices driven lower on fundamentals and technicals

WTI_oil_prices_dailyThese are interesting times for oil traders and speculators with Friday’s OPEC meeting in Vienna now on the horizon, and the question that will then be answered is whether the group will cut output to stem the supply glut that is now increasingly having to be held offshore around the oceans of the world. Yesterday’s oil inventories did little to ease the constant pressure on oil prices, with a forecast draw of -0.6bbls being reversed by a consequent build of 1.2bbls, and helping to drive oil prices ever lower. The US dollar too is adding its own weight, with many commodities now under the cosh of an ever strengthening currency.

From a technical perspective yesterday’s move lower carried increased significance for two reasons. First the wide spread down candle of yesterday’s oil trading session was accompanied with high volume, confirming the heavy selling, whilst also rising against selling volumes in late November, and all confirming the very bearish picture for the commodity. Second, the wide spread down candle also closed well below the congestion phase which had been building in the latter part of November, with oil finding some support in the $41 per barrel area, and suggesting a possible platform of support being built as a result. This particular bubble was burst in yesterday’s session with oil closing at $39.94 with this potential platform of support now becoming a solid region of resistance in any recovery. It is also interesting to note that the VPOC (volume point of control) on the daily chart has also moved lower from the $60 per barrel region to now rest at the $47 per barrel area and confirming further the very bearish picture.

Much now depends on the outcome of the latest meeting and whether OPEC are likely to continue the price war on the alternative energy producers, and if so, then longer term we could see oil prices continue lower still, and down towards the $32 per barrel area last seen in 2009. In the short term the low of 39.59 per barrel of August is now on the horizon, and should oil prices move through here, then we can expect to see downside momentum increase once again as the relentless fall in oil prices continues in the run to Xmas.

By Anna Coulling

Indicators from Quantum Trading and charts from NinjaTrader

About Anna 1054 Articles
Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

3 Comments on Oil prices driven lower on fundamentals and technicals

  1. Ann, Please put me on your email list. I have read your book on VPA several times and am trying to understand it. Thank you for writing it. i would like to take part in your training room webinars. Please send me the links. Thank you. Hartley

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