United States Oil (USO) expected to agree to reduce supply
Oil prices soared by around 5 percent on Monday after the United States and China agreed to a 90-day truce in their trade war, and ahead of a meeting this week by producer club OPEC that is expected to result in a supply cut.
U.S. West Texas Intermediate (WTI) crude futures CLc1 were at $53.41 per barrel at 0622 GMT, up $2.48 per barrel, or 4.9 percent from their last close.
U.S. crude prices were further pushed up by an announcement from Canada that Alberta province will force producers to cut output by 8.7 percent, or 325,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage. Most of Alberta’s oil is exported to the United States.
Stephen Innes, head of trading for Asia/Pacific at futures brokerage Oanda in Singapore said Alberta’s decision was “an unprecedented step to ease a crisis in the Canadian energy industry.”
International Brent crude oil futures LCOc1 were up $2.89per barrel, or 4.9 percent, at $62.35 a barrel.
China and the United States agreed during a weekend meeting in Argentina of the Group of 20 (G20) leading economies not to impose additional trade tariffs for at least 90 days while the pair hold talks to resolve existing disputes.
The trade war between the world’s two biggest economies has weighed heavily on global trade, sparking concerns of an economic slowdown.
Crude oil has not been included in the list of hundreds of products each side has slapped with import tariffs, but traders said the positive sentiment of the truce was also driving crude markets.
“The agreement to keep talking for 90 days during which tariffs are paused is an upside surprise,” U.S. bank Morgan Stanley said in a note to clients on Monday. It added, though,that trade negotiations would be “bumpy”.
Overall, Morgan Stanley said it saw a “slight upside in our 2019 growth outlook” because of the renewed talks.
QATAR LEAVES OPEC
Looking ahead, oil traders will eye a meeting by the Organization of the Petroleum Exporting Countries (OPEC) on Dec.6. At the meeting, the producer group, along with non-OPEC member Russia, is expected to announce cuts aimed at reining ina production overhang that has pulled down crude prices by around a third since October.
Analysts expect a reduction of 1 million-1.4 million bpd versus October levels, which were the highest by OPEC as a group since December 2016.
Within OPEC, Qatar said on Monday it would leave the producer club in January.
Qatar’s oil production is only around 600,000 bpd, while it is the world’s biggest exporter of liquefied natural gas (LNG).
The small Middle East country has also been at logger heads with its much bigger neighbour and de facto OPEC leader Saudi Arabia.
Outside OPEC , Russian oil output stood at 11.37 million bpd in November, down from a post-Soviet record of 11.41 million bpd it reached in October, Energy Ministry data showed on Sunday.
Meanwhile, oil producers in the United States continue to churn out record amounts of oil, with crude output at an unprecedented level of more than 11.5 million bpd.
Overall, the bias in prices is: Downwards.
Note: this chart shows extraordinary price action to the downside.
By the way, prices are vulnerable to a correction towards 12.75.
The projected upper bound is: 12.08.
The projected lower bound is: 10.31.
The projected closing price is: 11.20.
During the past 10 bars, there have been 4 white candles and 5 black candles for a net of 1 black candles. During the past 50 bars, there have been 18 white candles and 29 black candles for a net of 11 black candles.
A doji star occurred (where a doji gaps above or below the previous candle). This often signals a reversal with confirmation occurring on the next bar.
A long lower shadow occurred. This is typically a bullish signal (particularly when it occurs near a low price level, at a support level, or when the security is oversold).
A rising window occurred (where the top of the previous shadow is below the bottom of the current shadow). This usually implies a continuation of a bullish trend.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 69.0607. This is not an overbought or oversold reading. The last signal was a buy 2 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 36.49. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -26. This is not a topping or bottoming area. The last signal was a buy 2 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 0 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 0.540 at 11.270. Volume was 32% above average (neutral) and Bollinger Bands were 79% wider than normal.
Open High Low Close Volume___
11.270 11.270 11.020 11.270 32,356,384
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 11.12 13.67 13.74
Volatility: 69 44 35
Volume: 43,664,988 30,421,266 22,374,990
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND gapped up today (bullish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
UNTD ST OIL FUND is currently 18.0% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 33 periods. Our momentum oscillator has set a new 14-period high while the security price has not. This is a bullish divergence.
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