Technical Analysis
Nymex Crude Oil (CL)
Crude oil's rebound from 65.05 extended further to as high as 69.93 last week and the strength of the rebound mixed up the near term outlook. With 4 hours MACD crossed below signal line, initial bias is neutral this week. On the downside, below 68.10 will suggest that rebound from 65.05 has completed and will flip intraday bias back to the downside. Break of 65.05 will affirm the original bearish view that crude oil has topped out at 75.0 already and will bring fall resumption towards 58.32 key support next.
On the upside, above 69.93 will target 73.16 first. Break there will indicate that fall from 75.0 has completed at 65.05 already. the corrective structure will in turn indicate that medium term rally is still in progress for another high above 75.0 before completion.
In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil's medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 73.16 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first and break will target a retest of 33.2 low. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) instead.
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 even in case of another rise 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 ( 5 October – 11 October )
_________________________________________________________
---------- EDUCATION --------
-----TRADING METHODS ------
--------- FOR TRADERS --------
------------ OTHER -------------
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 price plunged to as low as 68.32 Friday as the US Labor Department reported disappointing employment data for September. Investors worried the pace of economic recovery will be delayed and thus took profits from long positions in oil. Although buying interest emerged afterward, WTI crude oil settled -1.2% at 69.95 during the day. On weekly basis, the benchmark contract gained +6%.
After plummeting to the lower end of recent trading range of 65-75, oil price recovered in the middle of the week although the US Energy Department reported larger-than-expected crude builds in the week ended September 25. Investors used the surprising draw in gasoline stockpile, lower-than-expected rise in distillate stockpiles and rise in fuel demand as reasons to bid up prices.
However, we retain out views that crude oil price will continue move range-bounded in coming weeks and occasional rise in demand does not alter the fact that fuel consumptions remain in depressed levels.
Gasoline demand rose to 9.126M bpd last week, representing increases of +3.8% on weekly basis and +4.5% on annual basis. However, Exxon's CEO said that gasoline demand has already peaked in 2007 and will decline into the futures. In the US, oil product demand was 20M bpd in 2007 and should fall to about 17M bpd by 2020.
Distillate demand climbed to 3.409M bpd after slipping for 3 consecutive weeks. However, current consumption level remained -12.3% below the same period in 2008. 4 week average of 3.387M bpd last week was still down -11.1% from a year ago. The incentive for refiners to switch production from gasoline to distillate is low as heating oil inventory stayed at sky-high level and refinery margins were low.
On the supply side, OPEC members should adhere more strictly to quotas although they seemed to be content with current oil price. According to a survey by Bloomberg, OPEC, the organization controlling 40% of the world's oil exports, produced 28.395M bpd in September, representing a -0.05M bpd drop from August. The 11 member countries bearing quotas produced 26.045M bpd in total during the month, representing a -0.01M bpd decline from August. However, the output was still +1.2M bpd about the assigned target.
Rex Tillerson, Exxon's CEO, commented that the OPEC should be more disciplined in their productions. He said that the cartel had been 'extraordinarily good' at sticking to the quotas and the compliance level had reached '82% which is very good for OPEC'. However, 'the compliance has reduced to 65% now. When the price of oil got back above 70, some people cannot help themselves'.
For non-OPEC countries, Russia's total production increased +1.7% yoy to 10.01M bpd in September. This has brought the nation's production to a post-Soviet high and at +25% above Saudi Arabia's production.
Although the IMF upgraded their economic forecasts, hard data suggested that recovery came in weaker than expected. Non-farm payrolls in the US declined -263K in September, compared with consensus of -187K, following a -201K decline in the previous month. Unemployment rate rose to 9.8% as expected. The government also revised downward their preliminary estimate of benchmark payrolls by -0.6% (70K per month) in the 12 months through March.
_________________________________________________________________________________________________________________________________________
