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The Further Correction of the Oil Quotes is Possible


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I expected a correction of the oil quotes after a significant growth for the last several months. Since the beginning of this week, the black gold market was dominated the by bearish sentiment. The WTI crude oil futures fell by more than 3%. The oil prices are consolidating near the $55 key support at the moment.

oil1-1611

Source: finviz.com


I have identified several factors that put pressure on the black gold dynamics:


1) The International Energy Agency lowered their forecast for the growth of the global oil demand by 100,000 barrels per day for 2017-2018. It became 1.5 million barrels per day for this year and 1.3 million barrels per day for the next one.


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

- oil inventories: +1.854 million barrels. Experts expected their decline by 2,200 million barrels;

- gasoline inventories: +0.894 million barrels;

- stocks of distillates: -0.799 million barrels;

- oil production: 9.645 million barrels per day (+25 thousand barrels per day);

The US continues to increase the oil production.


At the same time, the prospects for extending the OPEC global pact on the reduction of raw materials extraction provide additional support to theblack gold prices.


Here is the current technical pattern:


Support levels: 55.00 USD, 54.00 USD, 52.50 USD

Resistance levels: 56.50 USD, 57.50 USD

oil2-1611

The oil prices are testing the 55.00 key support level now. The indicators dont give us accurate signals. The price has fixed between 50 MA and 200 MA, which are quite strong dynamic support and resistance levels. The MACD histogram is near 0. Nevertheless, I dont exclude the further correction in the nearest future.


I recommend conservative waiting for a correction to the 56.50 mirror resistance level. Look for the entry points into the market in order to open short positions, if the price reaches this mark.


I also recommend selling the asset, if the quotes fix below the 55.00 level. The target for taking profit is the 54.00 level. The price may reach the 52.50 level in the medium term.


It is recommended to use a trailing stop for both positions.



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About the author


Igor Afa is a financial analyst at JustForex.

 

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