On Tuesday we noted technical developments provided confidence for a projection of lower crude oil prices (CME:CLQ14). Admitting the number of geopolitical developments left it difficult to project oil supply outcomes, we suggested technical analysis might prove a helpful guide.
Specifically, my call was that the bearish engulfing of Friday/Monday on the continuous chart had shown a likely trend change from bullish to bearish. In order for a bearish reverse to be more confidently confirmed, I further suggested that a consistent settlements below the Monday ‘mid’ of $106.795 on Tuesday, Wednesday and Thursday was necessary.
Right now, the contract is $0.86 lower to 105.64. A settlement here (or even as high as $106.13) would create an additional bearish engulfing. There is room for a strong sell-off as ‘non-commercial’ accounts are holding record net longs. A move to $95 would be extraordinary given current geopolitical conditions, but as far as positioning and technical conditions are concerned, not necessarily to be dismissed.
Where to with oil? Too many geopolitical balls in air
There are simply too many geopolitical balls in the air right now for many to keep aloft. While we may glance at some headlines and dig into a few stories, it is difficult for many of us to know, for example, if the Iraq/Syrian borders will be in ISIL hands tomorrow. Firms like Stratfor do a great job at geopolitical analysis and we are grateful for some of their feedback.
However, to understand enough of current situation to completely understand where oil might trade, we would need to give up our day job – analytic/brokerage. We may however find some useful information by looking at some charts.
On June 12 the nearest to expiry July 14 crude oil futures (NYMEX:CLN14) contract rallied above $105, a level that had not been successfully breached since September ’13. On June 12th the $2.07 advance had been the largest single session open/close advance since early December ’13. Further, aggregate volume for crude on June 12th was higher than any since March 12th, 3 months earlier. There has in fact only been 6 instances in the last 17 months where aggregate volume exceeded the 837,000 on June 12; four of those instances were centered in early July ’13 – almost a year ago.