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A Few Trading Ideas for the Bullish Sentiment on the Oil Market

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The bullish sentiment continues to prevail on the oil market. The futures for the WTI crude oil rose by more than 5.5% over the past two weeks. The quotes have reached the $55 key price per one barrel. The black gold prices have the potential for the further recovery.I have identified several factors that can support the oil quotes in the medium term:

1) Decreasing of the crude oil inventories in the USA. Lets look at the details of the of U.S. Energy Information Administration report:

- Oil inventories: -2.435 million barrels;

- Gasoline inventories -4.02 million barrels;

- Distillates stocks: -0.32 million barrels;

- Oil production: 9.553 million per day (+46 thousand per day);

The inventories of oil, gasoline and distillates have been reduced. At the same time, there is an additional pressure by the growing oil production in the United States.

2) According to the Reuters agency, the OPEC oil production fell by 80 thousand barrels per day in October. Thus, the level of compliance with the OPECs agreement terms on reducing the production increased from 86% to 92% in September.

3) People start talking that OPEC is likely to extend the global pact on limiting the oil production by the end of 2018.

Here is the current technical pattern:

Support levels: 53.80 USD, 52.60 USD, 51.80 USD

Resistance levels: 54.40 USD, 55.00 USD

oil 2-11

The futures for the WTI crude oil are consolidating now. The technical pattern is ambiguous. I have identified the following key support and resistance levels: 53.80 and 54.50. The indicators dont show any accurate signals: the price has crossed 50 MA; the MACD histogram is located near the 0 mark. Nevertheless, I recommend opening positions in the current trend direction.

Its advisable to open long deals if the price fixes above the 54.40 resistance level. The target for taking profit is the 55.00 mark. The price may reach the 57.00 level in the medium term.

An alternative option. I dont exclude an opportunity of the emergence of a technical correction. Open short positions, if the price fixes below the 53.80 support level. The quotes may move to 53.00-52.60.

I also recommend using a trailing stop for any of these positions.

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About the author

Igor Afa is a financial analyst at JustForex.


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