“Crude Corner”: Oil Industry Insights, Market Analysis and Price Outlook

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“Crude Corner”: Oil Industry Insights, Market Analysis and Price Outlook

Oil prices traded in positive territory on Thursday, but retreated from session highs during afternoon trading.

Several bullish factors supported prices, including United States companies cutting production, Saudi Arabia raising their official oil selling price and gasoline demand improving as economies around the world begin to start the reopening process.

WTI – CLM20, the United States benchmark, gained 1.5%, or 36 cents, to trade at $24.26 per barrel.

Earlier in Thursday’s session WTI had been up more than 11%, hitting a session high of $26.74.

This week, WTI has gained more than 27%, putting it on pace for one of its best weeks on record going back to the contract’s inception in 1983.

Of course, given the more than 50% decline this year a smaller move now accounts for a significantly larger percentage change.

Data from the Energy Information Administration showed that for the week ending May 1 production declined by 200,000 barrels per day to 11.9M BPD, which is more than 1M BPD below March’s record high.

Exxon, Chevron and ConocoPhillips are among the companies that have cut production in the face of depressed prices.

While inventory in the United States is still rising, it’s now at a slower pace.

Last week, stockpiles grew by 4.6M Barrels, which was smaller than the 8.67M Barrels build analysts had been expecting.

While the demand for gasoline is still well below its highs, government data showed that it is starting to turn a corner as states start to open up their economies.

All eyes were on yesterday morning’s Unemployment Claims Report.

With now 33.5+ Million Americans put on unemployment within the last 7 weeks, and countless people who have been unable to successfully file, things to come remain rather grim looking.

So the question is … Is this rally overdone?

Given WTI’s nearly 40% gain this month, some say the rally is overdone, especially as storage around the world continues to fill.

Looking forward to June’s contract expiration may likely cause some anxiety in the market after what transpired last month when May’s contract expiration traded negative.

Time will tell as it always does!

YEARLY Crude Oil Cycles

  • The 10 year cycle makes a high on May 3 and then sells off sharply into May 25 after which it rallies from a major low.
  • The 20 year cycle rallies sharply into May 19 then trades sideways into month end.
  • The 30 year cycle rallies into May 14 then sells off into the end of the month.
  • The 10 and 30 year cycles both head down from the 14th May.

Key turning point dates:

  • May 4
  • May 18
  • May 29

MONTHLY Crude Oil Outlook ( JULY – CLN20 )

The mid $13.00 price area can absorb annual selling pressures. Above the $30.00 price area remains a several week target. Potentially the 57.00 price area is in reach over the next several months.

Bullish Outlook:

The $30.00 price area can likely absorb buying pressure throughout the balance of May. Once tested, the market is susceptible to falling back to key support at the mid $13.00 price area within several weeks.

On the other hand, a daily settlement above the $30.00 price area indicates a good annual low has been made. Then the $42.00 price area would be expected within several weeks and the $57.00 price area then attainable within several months, then likely making the high for the remainder of the year.

Bearish Outlook:

A weekly settlement below mid $13.00 price area would likely yield a $5.00 price area retest within several weeks, the lowest price support presently found on any chart without revisiting negative price territories.

WEEKLY Crude Oil Outlook ( JUNE – CLM20 )

The main trend remains bearish according to the weekly swing chart. The market isn’t close to turning the main trend to bullish, but there is room for a normal 50% to 61.80% retracement. A trade through $6.50 will signal a resumption of the downtrend.

Based on last week’s price action, the direction of the June WTI crude oil market for this week-ending May 8 is likely to be determined by trader’s reaction to the pivot at the $20.00 price area.

Watch the price action and read the order flow at the $20.00 price area all week. Trader’s reaction to this level will set the tone. The market could get bullish over the $20.00 price area and bearish under the $11.00 price area

Bullish Scenario

A sustained move over the $20.00 price area will indicate the bulls are getting stronger. If this move is able to generate enough upside momentum then look for the rally to possibly extend into the resistance cluster at the $30.00 price area.

Bearish Scenario

A sustained move under the $20.00 price area will signal the presence of bears. The first downside target is a steep downtrending angle at the $11.00 price area. Crossing to the weak side of this angle will put the market in a bearish position with the next target the $6.50 price area.

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