United States Oil (USO) prices steady but set for weekly gain on supply cut optimism

United States Oil (USO) prices steady but set for weekly gain on supply cut optimism

United States Oil (USO) prices steady but set for weekly gain on supply cut optimism

Oil prices were steady on Friday but are set for their first weekly gain in six weeks on the assumption major producers will implement deeper output cuts to offset slowing demand in China, the world’s second-largest crude user.

Brent crude futures LCOc1 fell 9 cents to $56.25 a barrel by 0234 GMT, after gaining 1% the previous session. Brent is 3.3% higher for the week, the first increase since the week of Jan. 10.

U.S. West Texas Intermediate (WTI) futures CLc1 were down by 1 cent to $51.41 a barrel. The contract rose 0.5% on Thursday and is now 2.2% higher for the week.

Crude prices have plunged about 20% from their 2020-peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country’s quarantine to fight a coronavirus outbreak has halted economic activity.

However, the Organization of the Petroleum Exporting Countries and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day in response to the demand slump.

The market is signaling that some near-term demand for oil remains. The spread between the first-month April Brent future and the May contract has narrowed to a discount of only 1 cent a barrel on Friday from a discount of 33 cents a week ago. LCOc1-LCOc2

The narrowing of this contango, when prompt prices are less than later-dated contracts, suggest that demand for oil is improving for Brent-related crude.

Still, some concern remains about the impact the Chinese demand slowdown may have.

The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China.

The Chinese economy is expected to grow at its slowest rate since the financial crisis in the current quarter, according to a Reuters poll of economists who said the downturn will be short-lived if the outbreak is contained.

Technical Indicators

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 11.53.

The projected upper bound is: 11.35.

The projected lower bound is: 10.29.

The projected closing price is: 10.82.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 26 white candles and 23 black candles for a net of 3 white candles.

Separating lines occurred. If the lines occur during an uptrend and the first line is black and the second is white (which is the case with UNTD ST OIL FUND) then this suggests that the uptrend should continue.

If the separating lines occur during a downtrend (which appears to be the case with UNTD ST OIL FUND) and the first line is white and the second is black (which is not the case with UNTD ST OIL FUND) then this suggests that the downtrend should continue.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 66.8875. This is not an overbought or oversold reading. The last signal was a buy 5 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 38.68. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 1 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 12. This is not a topping or bottoming area. The last signal was a buy 6 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 1 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed up 0.030 at 10.840. Volume was 34% above average (neutral) and Bollinger Bands were 75% wider than normal.

Open     High      Low     Close     Volume___
10.820 10.900 10.750 10.840 28,876,688
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 10.64 12.00 11.84
Volatility: 36 29 39
Volume: 30,983,738 21,009,004 26,049,738

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.

Summary

UNTD ST OIL FUND is currently 8.4% 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 moderate flows of volume out of USO (mildly bearish). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 21 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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