WTI Oil Forecast: Eyes weekly 200-MA, but caution advised
|settled at a two-year high yesterday as the shutdown of Keystone pipeline is expected to suck out 590,000 barrel-per-day (bpd) of supply to the US. Reuters report says, " Operator TransCanada Corp has told clients it will cut deliveries on the pipeline linking Alberta’s oil sands with U.S. refineries by 85 percent through the end of November."
News/ Data
WTI in backwardation - The front-month contract moved to a premium to the second month for the first time in almost three years. Backwardation shows an immediate demand for crude oil. Thus, sellers would want to export more in the short-run. A pick up in US oil exports would make it more difficult for the OPEC and other major producers to rebalance the market.
US rig count rises - The Baker Hughes data released yesterday showed the oil drillers added nine oil rigs in the week to Nov. 22, bringing the total count up to 747. As per EIA, the total US output has jumped 15 percent since mid-2016 to a record 9.66 million bpd.
US inventories are down 15 percent from record highs - Reuters report says, "stocks have dropped by 15 percent from their records in March, to below 2016 levels." Inventories could drop further in the short-run if exports pick up in response to backwardation and due to reduced supplies from Canada.
Focus on OPEC meeting - Bulls are likely to take a breather ahead of the Organization of the Petroleum Exporting Countries and non-OPEC producers meeting on Nov. 30. The cartel will decide whether to extend a deal to cut production and support prices.
Despite the positive news flow, the aggressive bulls are advised to stay cautious as prices near critical technical hurdle.
Weekly chart
- The downward sloping weekly 200-MA of $58.43 could act as a stiff resistance.
Daily chart
- Watch out for a potential bearish RSI divergence - A bearish move today would confirm the bearish divergence, i.e. higher highs on prices and lower highs on the RSI. In such a case, prices could revisit the rising trendline support seen around $55.65 levels.
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