Perspectives for the price of Oil

Since the beginning of the August, the price of the WTI Oil is declining. Interestingly, since the beginning of the August, USD started the appreciation. So is the decline in the Oil a result of a stronger Dollar? Well, yes and no. Definitely it has an influence there but for example if we look at gold or other commodities we do not see this weakness. There must be something else here.

First of all, let us look at the macro data. What we got this week was Wednesday EIA Crude Oil Stocks change. The number came very bullish. The draw was much bigger than expected and the number of -8.9M should be normally a very good sign for the buyers. It was the largest draw in over a year! What is more, the actual number was lower than the expectations in the last 6 out of 7 weeks. So why the price of the WTI went lower? The answer in this case is the supply. Report showed a rise in gasoline inventories by 22,000 barrels and rise in distillate stockpiles by 702,000 barrels. Not to mention the fact that crude oil production increased to 9.502 million barrels per day. In other words: supply is huge and is still growing.

That is EIA but we also do have an OPEC, which does not have any good idea to stop the price from falling apart from the more jawboning and other verbal interventions. To wrap the fundamentals up, it does not look good for the buyers.

From the technical point of view, the situation is not great either. What we do have here is the breakout of the up trendline (blue), which was later used as a closest resistance. What is more, we went below the 38,2% Fibonacci and used that as a resistance as well. Before that we bounced of the 61,8%, broke the 50% and 48.15 USD/bbl slightly below. Those supports were crashed quite easily, showing a bullish weakness.

The sentiment stays bearish as long as we are below the 48,15 resistance (yellow). Chances for a further downswing are now much bigger than for a rise.

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