Crude oil: Some considerations about recent price action - BBH
|Analysts from Brown Brother Harriman, analyzed levels in Brent and WTI. Also they explained that the correlation between oil and US equities is not stable.
Key Quotes:
“Oil prices have recovered more than 50% of the decline since the mid-September peak. The next retracement objectives are found near $82 a barrel for Brent and $76.5 for WTI basis the continuation futures contract.”
“Brent for June deliverer is advancing for the sixth consecutive session. It briefly traded above $75 a barrel for the first time in two years. The high from 2015 is found $75.50-$75.70. Above there is $77.20 objective. The technical condition is stretched. Brent has advanced in seven of the last ten weeks, during which time it has gained about $10 a barrel.”
“Light sweet crude (WTI) for June delivery is advancing for a third consecutive session today. It has also moved in seven of the past ten weeks coming into this week's activity. The June contract has a rising trendline drawn off the mid-February and mid-March lows and the early April lows. It is found just below $64 at the start of next week. Initial support is likely near $66.60 and then $65.70.”
“The correlation between oil and US equities is not stable. (...) The correlation coefficient was between about 0.85 and 0.95 for that six-month period. The correlation was negative for most of Q2 and the first half of Q3 17. The correlation is negative now for the first time in eight months.”
“Speculators have amassed a huge net long position in the futures market. As of April 17, the net long non-commercial position stood at 728k contracts, a little below the record high set in early February near 739k contacts.”
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