Sive Morten
Special Consultant to the FPA
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Situation on many currencies, dollar index looks very similar and mostly suggests further dollar strength. That's why we've decided to bring analysis of some other related currency - CAD. As situation on Crude oil market stands slightly different.
Fundamentals
(Reuters) - Oil prices rose on Friday, with U.S. crude touching a two-year high, strengthening after U.S. rig data suggested drilling in the United States would throttle back.
The latest rig data supported the market’s view that a global supply glut is receding. Throughout the week, prices have been bolstered by rising global demand data and expectations that OPEC and other producing countries will extend a deal to cut output.
U.S. West Texas Intermediate (WTI) crude settled up $1.10 or 2 percent, at $55.64 a barrel, the highest since July 2015.
Global benchmark Brent futures settled up $1.45 or 2.4 percent at $62.07 a barrel. Brent has risen around 38 percent since its low in June 2017.
Both grades gained more than 3 percent in the week.
U.S. energy companies cut eight oil rigs this week, the biggest reduction since May 2016, extending a drilling decline that started over the summer when prices slipped below $50 a barrel.
The oil rig count fell to 729 in the week to Nov. 3, the lowest level since May, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
“The market continues to find support from expectations that we’re going to see the cut extended and from robust demand,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
The Organization of the Petroleum Exporting Countries meets at the end of November to discuss further action after it agreed nearly a year ago with Russia and other producers to hold back 1.8 million barrels per day (bpd) of oil supply.
Russia said on Thursday the deal, due to expire in March, could be extended but a decision was not imminent.
China’s roughly 9 million bpd of imports have surpassed those of the United States to top the world’s crude importer list.
“There’s an idea that the global economy is looking pretty good,” McGillian said, pointing to rising demand in other regions.
“China’s oil demand growth appears to be accelerating,” investment bank Jefferies said.
Physical oil prices are also rising. Saudi Aramco, the UAE’s ADNOC and Qatar Petroleum have all raised their crude prices for Asian buyers, with Aramco’s December premium over the average of the Oman and Dubai benchmarks now at the highest in three years.
Traders also eyed risks from ongoing financial troubles of OPEC-members Venezuela and its state oil company PDVSA.
The government and PDVSA owe some $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.
The next hard payment deadline for PDVSA is an $81 million bond payment that was due on Oct. 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.
If you let me guys, I bring you two cents on Crude Oil fundamentals. No doubts, crude oil is a political market, and you need to understand ongoing political processes to correctly understand what is going on there. You should do it with chill head, very pragmatically without making and judgments on who's right or wrong in one or another political situation or conflict. But extracting the core and hidden consequences for financial markets, and Crude oil in particular. This approach to market analysis demands isolated Political blog on forum. Actually I've given the hint to FPA administration that it needs to be created as situation in the world changes rapidly and may be it will appear a bit later. But right now we will bring just light insight on Crude oil market, so you better understand what is going on.
Actually not too far ago, I've placed Crude Oil post where I've given you a hint with forecast of Crude oil rise.
Speaking in two words there were no shale oil revolution in US and no delivery of this oil to Europe. It was a stolen oil from Syria by ISIS, which was delivered to Turkey and Israel, "laundered", legalized and then sold to Europe and other consumers. As oil stealing has turned to industrial scale it was disguised as "shale revolution in US". Crude oil prices were start to dropping as bargain price from Syria was very low.
As Russian coalition efforts were led to some success, oil transfer channels have been destroyed and oil fields gradually have come back to government hands - "shale revolution"; surprisingly stalled and crude oil prices stabilized. Geopolitical situation in Middle East were starting to change
and Russia with OPEC sat down for conversation.
Now Middle East more and more coming under control of Turkey, Iran and Russia. Nobody from them are interested with low crude oil prices. And this tendency will continue. Qatar already has got warm fluffy slippers from Putin and joined new Middle East order. In fact, Iran and Qatar control all Middle East natural gas as well. So we must forget about crude oil below 50$. Price will go higher in long-term and should stabilize around 75-80$, I suppose.
Middle East journey is a big campaign. Syria is just a beginning. Libya and Afghanistan are next. So this is a big topic for political blog. Here I do not provide you any links on sources, but you could find them, if you want.
Yes, action to 80 bucks will not be smooth. But we need to keep this fundamental background to clearly understand what is going on.
COT REPORT
We consider both reports as for Crude oil as for CAD. Loonie has reached extreme levels of net long position 6-8 weeks ago and technically it needs some relief that now stands under way. Gradually as net long position (inverse scale here) as open interest smoothly decrease. This is typical for retracement:
On Crude oil we have similar situation but oil has not reached record levels of net position. Here open interest has dropped more than net long position. It means that traders were closed as longs as shorts, but there were slightly more longs closed.
Sentiment analysis points on retracement that stands as on Crude oil as on CAD. Crude oil is also entering in seasonal bullish trend as winter is coming.
Technicals
Monthly
It was rather long time guys, when we've taken a look at CAD in weekly research. July, if I make no mistake.
But mostly our analysis was correct. Market indeed has reached monthly strong support area and completed first AB-CD minor target. As you can see from the chart - this area indeed is rather strong and includes monthly K-support area and Agreement (with AB-CD target), Yearly Pivot Support 1, and previously there was a monthly OS as well. Now loonie has turned to reasonable bounce up. In fact, this bounce is an object of short term analysis - how high it could climb.
At the same time, longer-term view suggests that as soon as current upward reaction will be over - market could continue move down with the same AB-CD pattern. Next target stands at 1.1560. And mostly CAD strength corresponds to our long-term expectations on Crude oil market. Also we have some kind of “three black crows” – rare candlestick pattern, as on slope of AB leg, as CD leg.
Another technical reason, guys, we anticipate further Crude oil growth and CAD as well is unfilled gap on monthly chart. It is interesting, that if, our major AB-CD pattern will be completed – it will accurately close this area:
Weekly
Now we’re coming directly to upside action analysis. Here we do not see anything criminal yet, guys. Upward action goes rather well. CAD has not reached yet the major resistance that stands slightly higher – 1.3065-1.3130 K-area and MPR1. Now market is coiling around MPP. It means, that in perspective of few weeks upside action has chances to continue.
But in shorter perspective, 1-2 weeks, it stands under question because of 2 reasons. Loonie itself has created tweezers top at reversal swing. Usually tweezers trigger some retracement down. Second – this idea confirms by Crude Oil situation. If you will take a look at daily chart, you’ll see butterfly “sell” failure and crude oil prices continue upward action.
Besides, on monthly chart we have a kind of “morning star” candlestick pattern and the nature of this pattern suggests some pullback inside its body.
Daily
So, on daily chart we do not have a lot of tools for analysis. Trend has turned bearish on Friday. Objective points that we have mostly suggest that slightly higher action should happen before major reversal here – as AB=CD as 1.27 extension have not been completed. But, at the same time we have weekly tweezers that give little space for any upside action.
But, despite how retracement down will happen – first destination point will be 1.2590-1.2617 K-support and daily OS area.
Intraday
Intraday chart also mostly suggests immediate downside continuation. Here we have DRPO “Sell” Look-alike pattern and no hint on patterns that could suggest any upside continuation. DRPO target has not been reached yet. Besides, there was strong rally on crude oil market, despite USD strength on Friday. Thus, it will not be surprise if downside action will continue on next week as well.
Conclusion:
That’s being said, we confirm our long-term CAD target around 1.1560 area.
In shorter-term perspective, it seems that CAD could show retracement to daily 1.26 support area first.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
Fundamentals
(Reuters) - Oil prices rose on Friday, with U.S. crude touching a two-year high, strengthening after U.S. rig data suggested drilling in the United States would throttle back.
The latest rig data supported the market’s view that a global supply glut is receding. Throughout the week, prices have been bolstered by rising global demand data and expectations that OPEC and other producing countries will extend a deal to cut output.
U.S. West Texas Intermediate (WTI) crude settled up $1.10 or 2 percent, at $55.64 a barrel, the highest since July 2015.
Global benchmark Brent futures settled up $1.45 or 2.4 percent at $62.07 a barrel. Brent has risen around 38 percent since its low in June 2017.
Both grades gained more than 3 percent in the week.
U.S. energy companies cut eight oil rigs this week, the biggest reduction since May 2016, extending a drilling decline that started over the summer when prices slipped below $50 a barrel.
The oil rig count fell to 729 in the week to Nov. 3, the lowest level since May, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.
“The market continues to find support from expectations that we’re going to see the cut extended and from robust demand,” said Gene McGillian, director of market research at Tradition Energy in Stamford, Connecticut.
The Organization of the Petroleum Exporting Countries meets at the end of November to discuss further action after it agreed nearly a year ago with Russia and other producers to hold back 1.8 million barrels per day (bpd) of oil supply.
Russia said on Thursday the deal, due to expire in March, could be extended but a decision was not imminent.
China’s roughly 9 million bpd of imports have surpassed those of the United States to top the world’s crude importer list.
“There’s an idea that the global economy is looking pretty good,” McGillian said, pointing to rising demand in other regions.
“China’s oil demand growth appears to be accelerating,” investment bank Jefferies said.
Physical oil prices are also rising. Saudi Aramco, the UAE’s ADNOC and Qatar Petroleum have all raised their crude prices for Asian buyers, with Aramco’s December premium over the average of the Oman and Dubai benchmarks now at the highest in three years.
Traders also eyed risks from ongoing financial troubles of OPEC-members Venezuela and its state oil company PDVSA.
The government and PDVSA owe some $1.6 billion in debt service and delayed interest payments by the end of the year, plus another $9 billion in bond servicing in 2018.
The next hard payment deadline for PDVSA is an $81 million bond payment that was due on Oct. 12 but on which the company delayed payment under a 30-day grace period. Failing to pay that on time would trigger a default, investors say.
If you let me guys, I bring you two cents on Crude Oil fundamentals. No doubts, crude oil is a political market, and you need to understand ongoing political processes to correctly understand what is going on there. You should do it with chill head, very pragmatically without making and judgments on who's right or wrong in one or another political situation or conflict. But extracting the core and hidden consequences for financial markets, and Crude oil in particular. This approach to market analysis demands isolated Political blog on forum. Actually I've given the hint to FPA administration that it needs to be created as situation in the world changes rapidly and may be it will appear a bit later. But right now we will bring just light insight on Crude oil market, so you better understand what is going on.
Actually not too far ago, I've placed Crude Oil post where I've given you a hint with forecast of Crude oil rise.
Speaking in two words there were no shale oil revolution in US and no delivery of this oil to Europe. It was a stolen oil from Syria by ISIS, which was delivered to Turkey and Israel, "laundered", legalized and then sold to Europe and other consumers. As oil stealing has turned to industrial scale it was disguised as "shale revolution in US". Crude oil prices were start to dropping as bargain price from Syria was very low.
As Russian coalition efforts were led to some success, oil transfer channels have been destroyed and oil fields gradually have come back to government hands - "shale revolution"; surprisingly stalled and crude oil prices stabilized. Geopolitical situation in Middle East were starting to change
and Russia with OPEC sat down for conversation.
Now Middle East more and more coming under control of Turkey, Iran and Russia. Nobody from them are interested with low crude oil prices. And this tendency will continue. Qatar already has got warm fluffy slippers from Putin and joined new Middle East order. In fact, Iran and Qatar control all Middle East natural gas as well. So we must forget about crude oil below 50$. Price will go higher in long-term and should stabilize around 75-80$, I suppose.
Middle East journey is a big campaign. Syria is just a beginning. Libya and Afghanistan are next. So this is a big topic for political blog. Here I do not provide you any links on sources, but you could find them, if you want.
Yes, action to 80 bucks will not be smooth. But we need to keep this fundamental background to clearly understand what is going on.
COT REPORT
We consider both reports as for Crude oil as for CAD. Loonie has reached extreme levels of net long position 6-8 weeks ago and technically it needs some relief that now stands under way. Gradually as net long position (inverse scale here) as open interest smoothly decrease. This is typical for retracement:
On Crude oil we have similar situation but oil has not reached record levels of net position. Here open interest has dropped more than net long position. It means that traders were closed as longs as shorts, but there were slightly more longs closed.
Sentiment analysis points on retracement that stands as on Crude oil as on CAD. Crude oil is also entering in seasonal bullish trend as winter is coming.
Technicals
Monthly
It was rather long time guys, when we've taken a look at CAD in weekly research. July, if I make no mistake.
But mostly our analysis was correct. Market indeed has reached monthly strong support area and completed first AB-CD minor target. As you can see from the chart - this area indeed is rather strong and includes monthly K-support area and Agreement (with AB-CD target), Yearly Pivot Support 1, and previously there was a monthly OS as well. Now loonie has turned to reasonable bounce up. In fact, this bounce is an object of short term analysis - how high it could climb.
At the same time, longer-term view suggests that as soon as current upward reaction will be over - market could continue move down with the same AB-CD pattern. Next target stands at 1.1560. And mostly CAD strength corresponds to our long-term expectations on Crude oil market. Also we have some kind of “three black crows” – rare candlestick pattern, as on slope of AB leg, as CD leg.
Another technical reason, guys, we anticipate further Crude oil growth and CAD as well is unfilled gap on monthly chart. It is interesting, that if, our major AB-CD pattern will be completed – it will accurately close this area:
Weekly
Now we’re coming directly to upside action analysis. Here we do not see anything criminal yet, guys. Upward action goes rather well. CAD has not reached yet the major resistance that stands slightly higher – 1.3065-1.3130 K-area and MPR1. Now market is coiling around MPP. It means, that in perspective of few weeks upside action has chances to continue.
But in shorter perspective, 1-2 weeks, it stands under question because of 2 reasons. Loonie itself has created tweezers top at reversal swing. Usually tweezers trigger some retracement down. Second – this idea confirms by Crude Oil situation. If you will take a look at daily chart, you’ll see butterfly “sell” failure and crude oil prices continue upward action.
Besides, on monthly chart we have a kind of “morning star” candlestick pattern and the nature of this pattern suggests some pullback inside its body.
Daily
So, on daily chart we do not have a lot of tools for analysis. Trend has turned bearish on Friday. Objective points that we have mostly suggest that slightly higher action should happen before major reversal here – as AB=CD as 1.27 extension have not been completed. But, at the same time we have weekly tweezers that give little space for any upside action.
But, despite how retracement down will happen – first destination point will be 1.2590-1.2617 K-support and daily OS area.
Intraday
Intraday chart also mostly suggests immediate downside continuation. Here we have DRPO “Sell” Look-alike pattern and no hint on patterns that could suggest any upside continuation. DRPO target has not been reached yet. Besides, there was strong rally on crude oil market, despite USD strength on Friday. Thus, it will not be surprise if downside action will continue on next week as well.
Conclusion:
That’s being said, we confirm our long-term CAD target around 1.1560 area.
In shorter-term perspective, it seems that CAD could show retracement to daily 1.26 support area first.
The technical portion of Sive's analysis owes a great deal to Joe DiNapoli's methods, and uses a number of Joe's proprietary indicators. Please note that Sive's analysis is his own view of the market and is not endorsed by Joe DiNapoli or any related companies.
