Home / Blog / Market Analysis / A quick look at a couple of Crude Oil charts after last nights spike and reversal

A quick look at a couple of Crude Oil charts

Market Analysis /
Greg McKenna / 05 Sep 2018

Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices. 

As ever, feedback welcome

QUICK SUMMARY

Oil back off the resistance I’ve been talking about again overnight. WTI is at $69.33, down 0.7% and Brent is at $77.87, down 0.4%.   

BIGGER PICTURE

There was plenty of bullish news on oil overnight for oil. Much of it is involuntary cuts from storms, battles, and leakages. That and further reaction to the fall in Iranian supply saw prices for both WTI and Brent spike through, but break below - so can I say respect on a dialy close basis - the levels I’ve been talking about recently and have reversed away and down from them.

Clearly, there is strong support for higher prices from this continued disruptions and OPEC's desire to keep prices relatively elevated, but not super hot. 

But, my sense is that the big issue going forward, if this EM crisis morphs into something more troubling, is not just demand growth but total demand. Of course, we have storm season now in the US, and we have the Iranian sanctions coming up, plus the battle in Libya (ceasefire last night) and various other outages that pop up all the time. But if EM gets worse the global backdrop – or perceptions of it – will deteriorate. And that will impact crude markets.

So for the moment, I’m looking for more downside unless $70.40/50 breaks for WTI and $79.50/70 gives way in Brent - on a close basis

Here's the 4 hour chart in Brent, which I'm respecting, but which - if broken - would suggest a move lower has begun. 

Click on me, I'll expand
Click on me, I'll expand

Here's the daily WTI chart. It would have been difficult to watch the price head close to a dollar through the $70.40/50 resistance. LIkely the chance of getting stopped in and out would have been high. So there'll be some gunshy traders today - I'm glad I didn't have an order in that is for certain. 

I confess to it being a harder picture now. But if price falls through last nights low at $69.00/05 another dollar could come off the price.

Click on me, I'll expand
Click on me, I'll expand

Please note I talk about both Brent and WTI each day in my Markets Video.

Oh, and Javier Blas shared a good link on Twitter of Oxford Economics look at oil markets in 2018 and 2019 - how e got here and whats next. It's worth a look. 

DATA:

Crude traders need to watch the flow of disruption headline at the moment. There seems to be a lot with storms, leakages, wars, and Iran. And of course the API and EIA inventory data are a day later than usual this week because of the Labor Day holiday Monday. 

Other than that, on the day Australia’s Q2 GDP is the key event here at home with expectations of solid growth high. It’s also services and by extension composite PMI day around the globe. China will be important this morning, but so too Europe, Japan, Korea and EM economies. Retail sales in Europe are out tonight along with US and Canadian trade data before the big one with the release of the Bank of Canada’s interest rate decision. I’m expecting governor Poloz and his colleagues to keep rates at 1.5%.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

gregmckenna.com.au

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