In this week’s Equity Leaders Weekly we are going to take a commodity focus and give an update on both Crude Oil and Natural Gas as both have seen some significant positive moves since they were last covered.
Crude Oil Continuous Contract (CL.F)
Crude oil snapped its longest streak of daily gains in 2017 on Wednesday after 8 consecutive positive trading days as the markets priced in both support coming from short-term inventories as well as the longer-term outlook for supplies in the US – closing at $53.11/bbl. Both the Energy Information Agency (EIA) and the American Petroleum Institute (API) both reported declines in crude inventories of 2.2 million barrels and 1.3 million barrels, respectively – the first draw of stockpiles in a month. While short term numbers were positive, the EIA also issued a report showing US crude output rising to a record 9.9 million barrels per day (bpd) in 2018. This number is up over 7% from the projected 9.22 million bpd for 2017.
On May 26th the Organization of Petroleum Exporting Countries is set to meet in Vienna where they will discuss the progress of their coordinated production cuts where the cartel pledged to cut production by 1.2 million bpd. So far the group has managed to meet that mark and Saudi Arabia is rumored to support extending the cuts into the second half of 2017 in order to prevent a downside price shock to crude, however the final decision is yet to be made.
In looking at the chart we can see that CL.F is having a tough time breaking through the strong technical resistance level at $55 having bounced and reversed off this level on its last two attempts. The most recent pull back column of 6 O’s CL.F has since rebounded and is once again attempting to break that $55 level. A move above this level could signal strength to the next resistance mark just above $60. A failed break through at $55 resistance may find support at $48.88, $46.98 and below this at $43.40. Sometimes these strong technical resistance levels take multiple attempts to break through - so the $55 range will be an important inflection point to keep an eye on along with news from OPEC, inventory information and global geopolitical risks which could influence short-term crude prices.
With an SMAX of 10 out of 10, CL.F is showing near term strength versus the asset classes.
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