Technical Analysis
Nymex Crude Oil (CL)
Crude oil dropped further to as low as 67.43 last week before turning sideway. Initial bias is neutral this week and some sideway trading might be seen. Nevertheless, further decline is still in favor as long as 71.60 resistance holds. Below 67.43 will target 65.23 support next. Break there will confirm the case that whole rise from 58.32 has completed and will bring deeper fall to test this key support level. On the other hand, strong rebound above 65.23, followed by break of 71.60 resistance will suggest that fall from 75.0 is possibly a correction only and rise from 58.32 is still in progress. Intraday bias will then be flipped back to the upside for a 75.0 and then long term fibonacci resistance at 76.77 (38.2% retracement of 147.27 to 33.2)
In the bigger picture, there is no change in the view that rise from 33.2 is a correction to whole down trend form 147.27. Question remains on whether such rally has completed at 75.0 already. Crude oil is now at important medium term trend line support. Sustained trading below will be the first alert that such rise has finished. Break of 58.32 will confirm this case and turn outlook bearish for 33.2 low next. On the upside, while another rise cannot be ruled out for the moment, strong resistance is expected as crude oil enters into 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) and bring reversal finally.
In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While there rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.
Nymex Crude Oil Continuous Contract 4 Hours Chart
Crude Oil Weekly report (7 September– 13 September )
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Nymex Crude Oil Continuous Contract Daily Chart
Nymex Crude Oil Continuous Contract Weekly Chart
Nymex Crude Oil Continuous Contract Monthly Chart
Fundamental Analysis
Crude oil was little changed Friday. Although surge of US unemployment rate to 9.7% dragged price down to 67.12, the benchmark contract managed to recover and closed +0.1% higher at 68.02. Over the week, the back gold dropped -6.5%.
After spiking to 10-month high at 75, crude oil has been moving downward and has lost almost -10% so far. We believe a temporary top has been formed there and price will continue to move with a range of 65-75.
The US Energy Department reported that crude inventory drew -0.37 mmb to 343.4 mmd for the week ended August 28. Gasoline inventory also dropped -2.97 mmb while distillate rose +1.18 mmb. Despite the lower-than-expected decline in crude and larger-than-expected increase in distillate stockpiles, investors did find some positives from the report. That is, a +4% weekly increase in gasoline demand. While this might be a sign of demand improvement, we would advise cautions in interpreting the data as retailers usually stock-up fuel before the public holiday on Monday. The surge in gasoline consumption can be just due to seasonality.
OPEC's general meeting will be held on September 9 in Vienna. The cartel controlling the world's 40% of oil exports looks satisfied with the current oil price and is likely to keep production target unchanged at 24.845M bpd for a third time. Member countries such as Algeria, Kuwait, Libya, Qatar and Iraq (no quota) have signaled in recent weeks that the current quota level is appropriate.
While the OPEC prefers 'wait-and-see' how the oil market develops, we believe it has to do more to remove the large stock in the market. According to the US Energy Department, inventories in OECD countries represented around 62 days worth of consumption in June, compared with OPEC's target of 52-54 days.
The CFTC has adopted tighter regulations to curb excessive speculations, especially on energy and agricultural prices. Several commodity futures were affected. 2 Deutsche Bank PowerShares commodity funds lost the exemption from US position limits in wheat and corn. United States Natural Gas Fund LP suspended a new offering of 1B shares while Barclays Bank suspended selling new shares of its iPath natural gas ETNs. Tightening in position limits should cap oil price advances as investors' interest in gaining financial exposure in commodities will be reduced.
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