Wednesday’s Technical Analysis: WTI Crude Oil

Posted by: : Paul EbelingPosted on: October 15, 2014 Wednesday's Technical Analysis: WTI Crude Oil

Wednesday’s Technical Analysis: WTI Crude Oil

Severe selling pressure is being exerted on both the WTI and Brent Crude Oil contracts and it is difficult to predict where prices will bottom out with OPEC members Saudi Arabia and Kuwait both playing down the possibility of the cartel reducing its output.

OPEC refusing to cut production, there seems to be a price war developing within the cartel with Saudi, Iraq and Iran all selling oil below the international benchmark prices as they seek to maintain their market share.

Comments from the International Energy Agency (IEA) are unlikely to help reverse the trend.

A large proportion of shale Oil producers have a breakeven price of about 60 bbl. And, the IEA has revised down its world Crude Oil demand growth outlook.

In Y 2014, it expects demand will grow by 0.7-M BPD, down 200,000 BPD from the prior estimate. For Y 2015, the IEA expects demand to expand by 1.1-M BPD some 300,000 BPD less than the prior forecast.

The demand outlook took another hit Tuesday morning after the release of some weaker than expected data from the Eurozone, with industrial production falling by a larger than expected 1.8% in August.

Then there is the USD, which has risen back after Monday’s small correction, as a result of the falling EUR/USD in response to those weaker ZEW and industrial output numbers. A stronger USD usually undermines Crude Oil and Gold because they are denominated in the Buck.

As a result of Tueday’s sell-off, Brent broke below the Key support at 88.50. This mark put a ceiling to prices in Y 2010 before turning into support in June 2012.

Each time, the reaction off of this mark has been significant, as can be seen on the Brent chart  below (fig. 1). The fact that Brent has now broken below this Key mark suggest we may see another sharp move to the Southside now. So, unless it unexpectedly rallies and finishes above 88.50 now, expect the downward trend to remain in place for now.

The next Key marks to watch are 85.00 and 80.00, 2 psych price points.

The technical picture for the WTI Crude Oil contract (fig. 2) remains Bearish. After spending a few days in consolidation around the psych mark at 85.00, the Bullish speculators have faded. At the time of this writing, the US Crude Oil contract is at 80.78, the 81.00 area ties in with the 161.8% Fibonacci level of the rally that started in January and finished in June.

 West Texas Intermediate (WTI), also known as WTI Crude Oil or Texas light sweet, is a grade of Crude Oil used as a benchmark in Oil pricing.

This grade is described as light because of its relatively low density, and sweet because of its low sulfur content.

WTI Crude Oil is the underlying commodity of Chicago Mercantile Exchange’s COMEX Oil futures contracts.

The price of WTI Crude Oil is often referenced in news reports on Oil prices, alongside the price of Brent Crudefrom the North Sea.

Other important Oil markers include the Dubai Crude, Oman Crude, Urals oil and the OPEC Reference Basket.

WTI Crude Oil is lighter and sweeter than Brent Crude Oil, and considerably lighter and sweeter than Dubai orOman.

Have a terrific week.

HeffX-LTN

Paul Ebeling

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Paul Ebeling

Pattern Recognition Analyst, equities, commodities, forex
Paul Ebeling is best known for his work as writer and publisher of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly-regarded, weekly financial market letter, where he enjoys an international audience among opinion makers, business leaders, and respected organizations. Something of a pioneer in online stock market and commodities discussion and analysis, Ebeling has been online since 1994. He has studied and worked in the global financial and stock markets since 1984.
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