Thank you for reading this week’s oil analysis
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Oil ended down slightly this week as the Baker-Hughes rig report showed a very bearish spike in the number of active U.S. rigs drilling for oil. This comes at a time that there were positive signs that the output cut, agreed to by major producers was showing signs of tightening supply. The fear is that the increasing output from the U.S. could hinder the efforts of the major producers to rebalance global oil supply.
Friday also saw the inauguration of Donald Trump as the 45th President of the United States. With his presidency comes the expectations that oil drilling restrictions would be eased which could contribute to higher domestic production; putting further pressure on prices.
Meanwhile, major world producers have been cutting output as part of their agreement, which began January 1st.
Phil Flynn, analyst with with Phil Flynn price group noted in his daily newsletter;
Despite evidence from the International Energy Agency and private oil production watchers, OPEC is complying with cuts yet there is a sense from oil producers that the market is not acting like it should. Comments made by Saudi oil minister Khalid al-Falih, the de facto leader of the OPEC, touted the compliance cuts and reversed course and said that further cuts might be considered. So to get the market’s attention, they may say or do something this weekend. This the first non-OPEC-OPEC meeting with Russia in attendance to try to shock the market out its doubtful complacency.
With the information that production cuts (by major producers) is reducing global supply and the idea that U.S. producers will re-enter the market on an easing of restrictions by President Trump, it is no wonder that we continue to trade in a narrowing price range.
Crude Oil Analysis – The Charts
Crude-oil continues the consolidation pattern that has been developing over the last several months. The symmetrical triangle continues to narrow as we completed a retracement to the 78.6% fib level on January 3rd.
Last week we discussed the 4-hour chart “rising wedge” formation that developed. The rising wedge is a “bearish” formation and once broken, provides an end the the near term bullish price action. This week we added a triple top formation inside the bearish wedge. That is more bearish confirmation…
Summary – Oil Analysis
Crude definitely feels as though it is “coiling” up for a breakout. The charts are definitely showing the possibility for a bearish move, particularly if the supply concerns andU.S. producers come on-line in great numbers, persists.
Next week will see a surge of executive orders surrounding a number of issues affecting the economy and the USD.
This could provide some additional direction…until then…”chop-chop”
Above the Market
54.40 – 54.85
55.60 – 56.00
57.40 – 57.90
Below the Market
52.20 – 51.70
51.00 – 50.50
49.50 – 49.00
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