Oil futures moved lower on Thursday after industry data showed a surprise increase in United States crude stocks, which offset hopes for a demand recovery as coronavirus lockdowns ease.
For the week ending May 22 United States stockpiles rose by 7.9 million barrels, the United States Energy Information Administration said. Analysts had been expecting a draw of 1.3 million barrels.
Data from industry group API showed United States crude stocks rose 8.7 million barrels in the week to May 22, against analyst expectations for a 1.9 million-barrel draw.
Also weighing on prices was uncertainty about Russia’s commitment to continuing deep output cuts ahead of a June 9 meeting of the Organization of the Petroleum Exporting Countries and its allies, a grouping dubbed OPEC+.
Saudi Arabia and some other OPEC oil producers are considering extending record high output cuts until the end of 2020 but have yet to win support from Russia, according to OPEC+ and Russian sources.
Reportedly, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further “close coordination” on output restrictions on Wednesday.
With United States WTI holding above $30 a barrel, OPEC+ will be watching to see whether United States shale oil producers, who have breakeven prices in the high $20 to low $30 range, step up production.
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 $39.00 price area remains a several week target. If achieved, then the mid $55.00 price area would likely be in reach over the next several months.
Bullish Outlook:
The mid $26.00 price area can likely absorb selling pressure throughout the balance of May. Above which the $39.00 price area is the next near term several week target.
A daily settlement above the $39.00 price area indicates a good annual low has been made. Then the mid $55.00 price area would be attainable within several weeks.
Bearish Outlook:
A daily settlement below the mid $26.00 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 )
The 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.
Technical Forecast
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.
Bullish Scenario
A sustained move over $27.46 will indicate the presence of buyers. This could trigger a rally into the downtrending Gann angle at $28.86. Since the main trend is down, sellers could come in on the first test of $28.86, however, overtaking it could trigger an acceleration to the upside with near-term targets the minor top at $35.18 and the 50% level at $36.07.
Bearish Scenario
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.
Technical Summary
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
5 Trades Utilizing ONLY 3 Contracts Per Trade
Paid $17,340.00 of PASSIVE PROFIT in May
Crude Corner CLOSED Swing Trade … $55,800.00 in 11 DAYS!!!
Sunday evening May 10, 2020 @ 1800 EST we entered a swing trade position.
Position Size: 10 Contracts
Trade Directions: LONG
Contract: CLN20
Entry Price: $26.04
Target Price: $36.04
Stopped Out @ $31.62
Trade Duration: 11 Days
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