In the last two months, oil has hit two very different milestones.
In April, West Texas Intermediate, the United States oil benchmark, plunged below zero and into negative territory for the first time ever on record.
Meanwhile, May is shaping up to be WTI’s best month ever, going back to the contract’s inception in 1983.
This has been a never before seen, astonishing turnaround.
Improvements on both the demand and supply side of the equation have pushed prices higher.
Data shows that people in the United States and China are starting to hit the road again, while producers around the globe have cut output at record rates in an effort to prop up prices.
The latest figures from EIA show that United States production has dropped 1.6M BPD below the March high of 13.1M BPD.
Exxon, Chevron and ConocoPhillips are among the companies that have scaled back operations.
The contract has jumped more than 70% in May and posted four straight weeks of gains, but some traders warn that the near-term outlook for oil remains uncertain, and that prices could head back into the $20’s after settling around $33 last Friday.
Additionally, part of WTI’s blistering rally this month is due to the historic low from which it bounced.
Prices are still about 50% below January’s high of $65.65, significantly cutting into profits for energy companies, which are often saddled with debt.
A number of United States energy companies have already filed for bankruptcy protection, including Whiting Petroleum, which was once a large player in the Bakken region.
If prices stay at depressed levels, there could be more financial casualties.
Still, the market has shown signs of rebalancing itself, and analysts say that if demand continues to improve and producers keep wells shut-in, the worst of what we’ve seen in recent months could be over for oil.
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 $12.00 price area can absorb annual selling pressures. Above which the mid $39.00 price area remains a several week target. Potentially the mid $55.00 price area would then be in reach over the next several months.
he mid $27.00 price area can likely absorb selling pressure throughout the balance of May. Above which the mid $39.00 price area is the next near term several week target.
A daily settlement above the mid $39.00 price area indicates a good annual low has been made. Then the mid $55.00 price area would be attainable within several more weeks, likely making the high for the remainder of the year.
A daily settlement below the mid $27.00 price area would likely yield a $12.00 price area retest within several weeks, which would likely bottom out selling pressure for the remainder of the year.
WEEKLY Crude Oil Outlook ( JULY – CLM20 )
he main trend remains bearish according to the weekly swing chart, however, momentum has been trending to the upside since the formation of the closing price reversal bottom the week-ending May 1.
The market has a lot more work to do before the trend changes to bullish on the weekly chart. A trade through the last main top at $54.86 will change the main trend to bullish. A move through $17.27 will signal a resumption of the downward trend.
The minor range is $37.64 to $17.27. It’s 50% level at $27.46 remains it’s support. This price is actually controlling the near-term direction of the market.
The short-term range is $54.86 to $17.27. It’s 50% level at $36.07 which services as the first upside bullish target.
The main range is $62.95 to $17.27. It’s retracement zone at $40.11 to $45.50 is the major upside target. This zone likely controls the longer-term direction of the market.
Given the price action over the last three weeks, the direction of the July WTI crude oil futures contract the week-ending May 29 is likely to be determined by trader reaction to the steep uptrending Gann angle at $33.27.
A sustained move over $33.27 will indicate the presence of buyers. If this creates enough upside momentum then look for the rally to extend into $36.07. This is a potential trigger point for an acceleration into $40.11 to $40.86.
A sustained move under $33.27 will signal the presence of sellers. This could trigger the start of a steep break with the first target $27.46, followed by another uptrending Gann angle at $25.27.
Counter-trend upside momentum has been driving up July WTI crude oil since the week-ending May 1 at a pace of $4.00 per week. If this upside momentum is to continue the week-ending May 29 then the market is going to have to hold above $33.27. A failure to hold $33.27 will indicate that momentum is weakening. This could trigger a near-term correction towards $25.27.
May Crude Corner Weekly Passive Breakout Trade Recap
$18,140 of PASSIVE PROFIT over the past 3 WEEKS:
5/4/20 – 5/8/20 Weekly Trade Strategy Paid $6,460:
5/11/20 – 5/15/20 Weekly Trade Strategy Paid $6,080:
5/18/20 – 5/22/20 Weekly Trade Strategy Paid $5,600:
Crude Corner CLOSED Swing Trade … $55,800.00 in 11 DAYS!!!
On Sunday evening May 10, 2020 @ 1800 EST we entered a swing trade position.
Position Size: 10 Contracts
Trade Directions: LONG
Entry Price: $26.04
Target Price: $36.04
Stopped Out @ $31.62
Trade Duration: 11 Days
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