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Crude Oil Wrap Up


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December Crude Oil tested support on Monday, October 24, 2016, as Iraqi demands to be exempted from production cuts get louder. The Iraqis are the second largest oil producer in OPEC. Last month they produced more than 4.7 million b/d of crude oil. They will continue to do so and will increase production as needed. Iraq has been upfront since the agreement was first announced that they wouldnt comply with it and are now justifying their decision, with the Iraqi oil minister saying Iraq needs more money to fight the Islamic State militants. They also say their real output should be at 9 million b/d. Their production has been curtailed because of all the wars they have been involved in since the 80s. They arent cutting back. They support OPEC policy ad unity, but not at Iraqs expense. So just like OPEC cheerleader Iran, they are all for production cuts, and believe everyone should cut But them. OPEC believes that $55-$60 is a fair price to pay for crude oil; it will bring stability to the market. They, however, refuse to freeze/ cut production to bring supply/ demand into balance to achieve their price objective. Even if they are able stabilize their production at the agreed upon levels (32.5 to 33 mb/d), will Russia do the same? Its iffy at best. Will the US slow production? No way! They will increase production and are working to achieve that with every uptick in price. When I say will OPEC freeze/ cut production; I mean will Saudi Arabia freeze/ cut production? They have historically been the swing producer. Increasing when price rose too much and decreasing production when it got too low. They started the production glut by not cutting as US production increased. They wanted to destroy the US shale industry with low prices. It didnt work. It slowed US production, but the US shale industry made improvements in production and costs declined for surviving US producers. The US shale industry is poised for a revival. Rig counts have increased and getting ready to produce oil. The demand side remains questionable. Crude Oil was able to hold the 49.36 support level as the low (49.62) was above support. Crude oil shot up from the low and traded to resistance up at 50.65, reaching 50.68. Crude Oil ended the day at 50.49. Trendline resistance is at 50.65 and a break above here has 51.17 as the next resistance level. Trendline resistance is up at 51.85 and a break out from here puts the recent high of 52.22 in jeopardy. A break from here and crude oil could test 53.50. Support is at 50.00 and if Crude oil breaks down from here, it could test 49.71 and then 49.36. Trendline support is at 48.54.

High 50.98

Low 49.62

Last 50.49

Daily Pivots for 10/24/16:

R2

51.72

R1

51.11

PIVOT

50.36

S1

49.75

S2

49.00


If you are interested in a Managed Futures program for Crude Oil, check out this offering from Walsh Trading:

Walsh Asset Management Introduces Bluenose Capital

For those interested I hold a weekly livestock webinar on Friday, October 21 at 2:30pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

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Ben DiCostanzo

Senior Market Strategist

Walsh Trading, Inc.

Direct: 312.957.4163

888.391.7894

Fax: 312.256.0109

bdicostanzo@walshtrading.com

www.walshtrading.com

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About the author


Ben DiCostanzo
Senior Market Strategist
Walsh Trading

I began my career in the Securities industry working as a runner on the floor of the New York Stock Exchange while I attended Pace University. I then started working for Salomon Brothers in their Government Bond Trading arena. After graduating from Pace University with a degree in Accounting, I transferred to Chicago and became a member of the Chicago Mercantile Exchange utilizing my experience to execute trades and manage risk for institutional clients as a broker for Salomon Brothers on the trading floor. I then embarked to trade for my own account in the stock indices pits as a local before moving off the floor to aid and assist individual clients in their trading endeavors. I now work at Walsh Trading holding a series 3 broker’s license whose duties include being the firm’s Chief Market technician.

I understand that every client's needs are different, and I pride myself in tailoring my service to each client's unique circumstances and needs. Individual client experience, risk tolerance, and capital all play a role in how I approach the markets. I am involved in all markets using technical analysis to find opportunities. My approach is driven by the principles of capital preservation.

My trading philosophy is that if you can recognize and manage the risk, you have a better chance to be successful in trading. I advise clients to always use stops as money management in my opinion is the most important ingredient in trading commodities.

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