Potential Crude Oil Drops (Again)?
The price of West Texas Intermediate (WTI) crude oil has declined around 13 percent in the past year, still motivated by fears of excess world oil supply. This also means that OPEC’s efforts to boost oil prices through a production cut program have not been very successful.
According to the COT (Commitments of Traders) data provided by the CFTC (Commodity Futures Trading Commission), short positions in June have nearly doubled. Thus the net long position of crude oil futures reached the smallest number since August 2016. Well, market positioningdata like this are often used as an “indicator” that there is a possibility that many market players will be “tempted” to open a long alias buy position.
Indeed, oil prices then rebounded from the range of $ 43 / barrel reached on the 10th this month, in line with the COT data above.However, the strengthening was also motivated by a decline in the number of production from several oil-refining points. Nevertheless, it turns out that the United States (US) oil production has increased which has the potential to withstand the strengthening of oil prices.
In a recent survey conducted by CNBC, about half (fewer) of the number of respondents who thought that the Organization of the Petroleum Exporting Countries (OPEC) had lost the ability to control the market.They also argue that there is a possibility that crude oil prices will return to the range of $ 40 per barrel. Meanwhile, 60 percent of respondents think that OPEC is likely to continue to strive to boost oil prices.
Now let’s look at the technical facts.
From the chart (daily) that I show above, we can see that since January 2017 oil prices tend to move in a downtrend. Several times the price had “picnic” above the 20 and 50 MA on the daily chart, but it did not last too long and came back down.
Meanwhile the price has pulled back to the resistance area which is in the range 45.84-48.18 (note the area with yellow highlights on the chart).Also seen is the bearish divergence pattern on stochastic daily.
So, the technical facts are as follows:
- Crude oil prices have been in a downtrend since January 2017
- Oil prices are currently in the resistance area
- Bearish divergence is visible
So based on the technical appearance, there is a possibility that crude oil prices will return to decline towards the range of $ 44.39 per barrel to $ 42.04 per barrel.
However, we recommend to be careful if the oil price breaks above $ 49.63 per barrel, because it has the potential to be followed by a long-term bullish movement with the potential towards the range of $ 51.98 to $ 54.33 per barrel.