The Oil market saw a massive spike last night as markets jumped on US crude oil data. It was forecast to show a net -261K, however, the actual result was staggering to say the least. As current inventory data showed a -3431K loss, in return, markets rallied higher – a not so surprising result when you think about Oil markets.
However, the bullish candle closed lower as more information came about from Ukraine and the energy crisis taking shape in Europe. Many investors will be wondering if there is further moves higher for Oil based on what has recently happened. I’m here to say there is a bullish trend in the market, but the fundamentals are not quite matching up.
Despite what people believe about Oil, prices don’t constantly go up – this is contrary to what you might hear from the general consumer at a petrol pump. Supply and demand play a pivotal role in the prices that we see when trading Oil. As such, the recent de-escalation of the Ukraine crisis bodes well for Oil prices, especially when Russia has said that it will actually listen to an elected president; which is exactly what has happened.
This in turn led to Oil markets shifting lower, and they look like they may shift even lower.
Source: Blackwell Trader (Oil, D1)
A bullish trend line is apparent in the Oil market and for the most part, it could indeed hold in the near time. Short term though, it's likely that Oil will push lower, current RSI and Stoch shows a shift towards the sell side, and I believe we have more to come.
The problem with trend lines is that markets believe in them and then they don’t perform as well, what we could see here is a classic example of a market looking to test the trend line yet again. Or we could see the market punch right through and look to shift lower. The former would not surprise me in the current climate.
Adding against Oil’s favour is a global climate which is all about fracking and cheap Oil, and the world’s biggest consumer (USA) looking for ways to cut back on their carbon impact. At the same time, it seems unlikely we will see OPEC looking to push Oil prices up as it believes that Oil should be priced under a 100 dollars a barrel.
So in terms of price targeting, any push through the trend line – which is acting as dynamic support – would be advantageous for people looking to short. Strong support would be found around the 100 dollar mark which in turn would likely see a period of consolidation followed by 98.55 acting as the next level of support.
Overall, Oil is set for declines and it's probably a little overdue. In the short term, there is certainly room to move lower and I expect in the long term we will see Oil sink lower on global outlook and as risk appetite increases. The medium term will be the hard part, figuring out if the trend line will give way to the bears.