Learn to Trade Commodity Overview 30th June
Focus on Oil
Over the last week WTI futures have began to consolidate gains to the upside and have started to develop a trading range pausing the upward trend from the lows in May. Equity markets have taken a bearish tone over the last several days putting pressure on the oil market leading to signs of a potential short-term top developing.
Thoughts from the trading floor
The technical perspective appears bullish with higher lows maintaining the upside impetus in the medium term. However despite a strong performance last Friday where the market drove higher breaking the previous $78.95 high, but bulls were unable once again to hold the higher ground. The subsequent retracement quickly lead to a full retreat for the bulls and sellers undone all of the previous weeks gains. Support was once again found in at $75.28 to $75.17 area. If sellers are able to break this level the door will open a move down to $74.52 and possibly $72.53 levels. If buyers are able to repel the current downward pressure the upside resistance still remains at $78.95 and $79.37 If theses barriers are overcome a larger target of $80.50 should be eyed. Market participants will be looking for whether the market is set to consolidate over the coming days or still be continuously dragged lower by declining equity markets.
Last night the American Petroleum Institute reported that US oil inventories fell -3404K barrels last week. This compares to the analyst estimate for the DOE number of a 3685K barrel build. The API gasoline also fell -908K as opposed to the estimate for the DOE number of a surplus of 810K. With such a large discrepancy between the DOE estimates and the API number we expect the DOE release today to show a number outside of its expected range leading to increased volatility in the market.
Oil futures are heading for their first major quarterly decline since the end of 2008. The current economic picture still looks grim for oil markets with developing countries recovery beginning to slow further. Their still seems to be tough times ahead as oil markets decline on dollar strength, further reducing its investment appeal. Yet the US is entering into a new hurricane season may lead to a support in current prices over the coming months. Current hurricane Alex will likely miss main drilling locations in the Gulf of Mexico, which account for about 30% of the US oil output, leading to no major concern for the market.
Bull View
Bulls will be looking to rebound from the current dip in the market and build another leg higher. A breach of $78.51 will help to restore upward momentum and confirm the continuation of the trend.
Bear View
Bears will be looking to keep pressure on the market and press their advantage. A break of the key support at $75.17 could plunge the market lower forcing out more bullish positions.
Futex View
We believe oil markets will continue to maintain support and bounce back towards the $78 mark. Yet the market is still largely at the mercy of equity markets with their direction needed as confirmation of a dominate oil direction.
Tags: Commodity, learn to trade, market profile
