Alan's Finance Blog

Crude Oil Daily Technical Outlook

Nymex Crude Oil (CL)

Crude oil edged higher to 72.55 but upside momentum remains unconvincing. Nevertheless, another rise is still mildly in favor with 68.16 support intact. Break of 73.16 will indicate that fall from 75.0 has completed at 65.05 already. The corrective structure will in turn indicate that medium term rally is still in progress for another high above 75.0 before completion. On the downside, below 68.16 will suggest that rebound from 65.05 has completed and will flip intraday bias back to the downside. Break of 65.05 will reaffirm the original bearish view that crude oil has topped out at 75.0 already and will bring fall resumption towards 58.32 key support next.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 73.16 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first and break will target a retest of 33.2 low. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) instead.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Crude Oil Daily Technical Outlook

Nymex Crude Oil (CL)

Crude oil retreats sharply after rising to 7.197 and hit near term trend line resistance. With 4 hours MACD crossed below signal line, intraday outlook is turned neutral for the moment. Nevertheless, another rise is still mildly in favor with 68.16 support intact. Above 71.97 will bring rise resumption. Further break of 73.16 will indicate that fall from 75.0 has completed at 65.05 already. The corrective structure will in turn indicate that medium term rally is still in progress for another high above 75.0 before completion.

On the downside, below 68.16 will suggest that rebound from 65.05 has completed and will flip intraday bias back to the downside. Break of 65.05 will reaffirm the original bearish view that crude oil has topped out at 75.0 already and will bring fall resumption towards 58.32 key support next.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 73.16 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first and break will target a retest of 33.2 low. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) instead.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Crude Oil Daily Technical Outlook

Nymex Crude Oil (CL)

While intraday upside momentum in crude oil is not too convincing, further rise is still in favor with 68.16 minor support intact. Break of 73.16 will indicate that fall from 75.0 has completed at 65.05 already. The corrective structure will in turn indicate that medium term rally is still in progress for another high above 75.0 before completion. On the downside, below 68.16 will suggest that rebound from 65.05 has completed and will flip intraday bias back to the downside. Break of 65.05 will affirm the original bearish view that crude oil has topped out at 75.0 already and will bring fall resumption towards 58.32 key support next.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 73.16 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first and break will target a retest of 33.2 low. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) instead.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Oil Price Drops Despite Draw in Crude Stocks. Investors Worry About Fuel Demands

Crude inventory drew -0.98 mmb, compared with consensus of +2 mmb increase, to 337.4 mmb in the week ended October 2.Cushing also dropped -1.41 mmb. However, fuel stockpiles gained with gasoline stock building +2.94 mmb to 214.4 mmb and distillate stock rising +0.68 mmb.

WTI crude oil retreats after the report. Currently trading at 70.6, investors remain concerned about the demand outlook. RBOB gasoline price slides to 1.75 while heating oil plunges to 1.81.

US Oil Inventory

Comparison between API and EIA reports:

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department (EIA)for its weekly survey.  Oil inventories from the API and EIA moved in the same direction for over 70% of the time, using data in the past 4 years.

Source: Bloomberg, API, EIA

Crude Remains Under Pressure as Recovery Worries Linger

Crude oil price continues to edge lower gradually as economic data released in Europe failed to deliver a concrete message for sustainable economic recovery. Stock markets trade sideways, awaiting more clues on growth outlooks.

Final reading on the Eurozone’s services PMI was revised slightly upward to 50.9 in September while the Sentix Investor confidence improved to -12.6 in October (consensus: -12) from -14.6 a month ago. Moreover, retail sales slid another -0.2% mom in August. In the UK, services PMI rose to 55.3 in September, from 54.1 in the prior month. To net, these indicators came in largely inline with market expectations and gave no surprise that the economy is expanding rapidly.

European Stock markets fluctuate between gains and losses in morning session. UK’s FTSE 100 Index trades flat from last Friday while Germany’s DAX and France’s CAC 40 add +0.1%.

After failure to breach the resistance at 75 in mid-August, WTI crude oil has been trading within a trading range of 65-75 since then. We find that crude oil’s performance has been lagging that in stocks and the euro. This suggests that investors are paying more attention to energy fundamentals, rather than just being thrilled by market sentiments.

Record high inventory level, weak fuel demand (especially distillate) as well as slippage of OPEC compliance (compliance of 68% in August, compared with over 80% in 1Q09) has depicted a worrisome picture in the near-term. In fact, such backdrops do not justify current oil price level (around 70/bbl).

Then what makes the current price sustain? We believe it’s due to market forecasts of improving distillate demand in 4Q09. Apart from the traditional heating season in the fourth quarter as we enter winter, investors’ anticipation on rising distillate demand has hinged on improvement in US industrial production. Annual contraction in IP has moderated to -10.7% in August after reaching a trough in June (-13.3%). Continued recovery in IP probably will lead to more consumption in distillate.

Gold remains in consolidative mode but will likely gain for the second straight day amid weakness in USD. Others in the precious metal complex also climb higher with platinum rising to 1290 after plunging for 2 days to as low as 1266.4 last week. Silver also rebounds to 12.3.

Source: Oil n Gold

Crude Oil Weekly Technical Outlook

Nymex Crude Oil (CL)

Crude oil’s rebound from 65.05 extended further to as high as 69.93 last week and the strength of the rebound mixed up the near term outlook. With 4 hours MACD crossed below signal line, initial bias is neutral this week. On the downside, below 68.10 will suggest that rebound from 65.05 has completed and will flip intraday bias back to the downside. Break of 65.05 will affirm the original bearish view that crude oil has topped out at 75.0 already and will bring fall resumption towards 58.32 key support next.

On the upside, above 69.93 will target 73.16 first. Break there will indicate that fall from 75.0 has completed at 65.05 already. the corrective structure will in turn indicate that medium term rally is still in progress for another high above 75.0 before completion.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 73.16 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first and break will target a retest of 33.2 low. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) instead.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While there rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we’re still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that strong resistance should be seen between 76.77/90.24 fibo resistance zone even in case of another rise and bring reversal for another low below 33.2 before completing the whole correction from 147.27.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Nymex Crude Oil Continuous Contract Weekly Chart

Nymex Crude Oil Continuous Contract Monthly Chart

Crude Oil Daily Technical Outlook

Nymex Crude Oil (CL)

Crude oil’s rebound loses some steam ahead of 73.16 resistance but still, further rise is mildly in favor with 68.10 minor support intact. As discussed before, the corrective look of the fall from 75.0 to 65.05 argues that it’s merely a consolidation in the larger rise but 73.16 is yet taken out. Hence, we’ll stay neutral for the moment. On the downside, below 68.10 minor support will indicate that rebound from 65.05 has completed and will revive the case that fall from 75.0 is still in progress. Retest of 65.05 should be seen first. On the upside, however, break of 73.16 resistance will indicate that fall from 75.0 has completed and will turn focus back to this high.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 75.0 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) before completion.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Crude Oil Price Weakens as Investors Take Profits Ahead of US Employment Data

Crude oil price retreats below 70 as investors take profit ahead of the US employment report. Indicators released earlier this week have been rather mixed and ‘employment’ components have surprised to the downside. Falls in stock markets and advance in USD indicate reduction in risk appetite.

Consensus forecast the number of payrolls probably dropped -187K in September after a -216K decline in the prior month. Unemployment should have risen to 9.8% from 9.7%. Indeed, several market participants (i.e. investment banks) have revised down their estimates after the disappointing ISM manufacturing data, Challenger employment and ADP employment change.

The employment component of the ISM manufacturing index dropped -0.2 points to 46.2, indicating no much improvement from the -63K drop (August) in manufacturing payrolls in September. In a report by the Confederation Board, consumer confidence index fell to 53.1 from 54.1. Meanwhile the labor differential, the % of people thinking jobs are plentiful vs the % of people thinking jobs are hard to get, widened to -43.6 from -40 in August. This suggested the outlook on job market remains weak.

ADP showed that employment plunged -254K in September, compared with consensus of -195K, from a revised -277K in August. Challenger jobs sank -30.2% yoy in September after a -13.8% decline a month ago.

Stock markets plummet in both Asian and European sessions. UK’s FTSE 100 Index opens lower and is currently dropping -1% to 4998. Germany’s DAX and France’s CAC 40 also falling -0.7% and -1.2% respectively. In Asia, the MSCI Asia Pacific Index slid -2.1% while Japan’s Nikkei 225 Stock Average dropped -2.5%.

Natural gas for November delivery remains under pressure after dropping -7.8% to settle at 4.466 Thursday after the US Energy Department reported gas storage increased +64 bcf to 3589 bcf in the week ended September 25. At current level gas inventory has set a new record high by exceeding the peak level of 3545 bcf in November 2007.

Gold price continues to trade below 1000 as USD strengthens further. Others in the precious metal complex also weaken with silver sliding for the second consecutive day, losing another -1.3% to 16.2 and platinum dropping another -1% to 1275.

US auto sales plunged -23% to an annualized rate of 9.22M in September, suggesting pullback in sales after the government’s ‘cash to clunker’ rebate program.

Crude Oil Daily Technical Outlook

Nymex Crude Oil (CL)

Crude oil’s strong rebound from 65.05 is still in progress and breaches 70 level. The impulsive look of the rebound dampens our bearish view and in turn argue that fall from 75.0 might be completed with three waves down already. We’ll stay neutral for the moment. On the downside, below 68.10 minor support will indicate that rebound from 65.05 has completed and will revive the case that fall from 75.0 is still in progress. Retest of 65.05 should be seen first. On the upside, however, break of 73.16 resistance will indicate that fall from 75.0 has completed and will turn focus back to this high.

In the bigger picture, the lack of follow through selling so far dampens the bearish view that crude oil’s medium term rise from 33.2 has completed at 75.0. Nevertheless, risk remains on the downside as long as 75.0 resistance holds. A break below 65.05 support will solidify the case the crude oil has topped out in medium term again. In such case, deeper fall should be seen to test on 58.32 cluster support (38.2% retracement of 33.2 to 75.0 at 59.03) first. However, a break of 75.0 will indicate that rise from 33.2 has resumed for 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) before completion.

Nymex Crude Oil Continuous Contract 4 Hours Chart

Nymex Crude Oil Continuous Contract Daily Chart

Oil Price Has Little Change Depsite IMF’s Upgrades

Hovering around 70, the benchmark contract for crude oil changes little ahead of US opening. IMF’s upgrades on economic forecasts and OPEC’s production cut in September are bullish factors but investors probably feel nervous to push oil higher after the +5.8% rally yesterday.

IMF forecasts world economy will expand +3.1% in 2010, compared with +3.1% projected in July, as driven by growths of +9% and +6.4% in China and India respectively. As stated in the report, ‘the recovery has started and financial markets are healing…’in most countries, growth will be positive for the rest of the year, as well as in 2010′. However, ‘to sustain the recovery, private consumption and investment will have to strengthen as high public spending and large fiscal deficits are unwound’.

For OECDs, GDP in the US, Japan and the Eurozone are anticipated to rise by +1.5%, +1.7% and +0.3%. All of these estimates have been revised upward from Julys’ projections.

According to Bloomberg’s estimates, OPEC’s crude production declined 50K bpd from August to 28.395M bpd in September as led by reductions in Iraq, Saudi Arabia and Angola. For the 11 members (excluding Iraq) that are subject to quota, total output dropped -10K bpd to 26.045M bpd in September, though the production was still higher than the target.

Stock market plunges in both Europe and Asia. In the UK FTSE 100 Index slides -0.6% to 5106 as investors worry that equity rally in recent months has overextended. The benchmark index for British stocks soared +21% in 3Q09, the strongest quarterly rally since 1984. However, macroeconomic data do not seem to justify the surge. Released earlier, manufacturing PMI slipped to 49.5 in September from 49.7 in the prior month. The market had anticipated an improvement to 50.2. Germany’s DAX and France’s CAC 40 also lost ground after the 16-nation Eurozone recorded an unemployment rate of 9.6% in August.

In Asian session, the MSCI Asia Pacific Index slid -1.2% after rising for 3 days. In Japan, the Nikkei 225 Stock Average dropped -1.5% to 9978.6, the first close below 1000 in 2 months as the Tankan survey factored in bigger capex reduction in the year ended March 2010.

While staying above 1000, the benchmark contract for gold retreats to 1004.5 as the euro erases previous gains and sinks to 1.453. ECB President Trichet said, before the G-7 meeting, that ‘there is very strong sentiment that we have a shared interest in a strong international financial system and ‘excess volatility may have adverse implications’. The comment hinders further buying of the single currency as the central bank president seems to prefer a stronger dollar.