WTI Crude Oil: A Break Down Or Break Out Is Imminent
$USO, $OIL. $GS
For WTI Crude Oil, a breakout or breakdown is imminent as it consolidates inside converging trend lines.
Given the fundamental backdrop and the late August rally, WTI could breaks to the Northside.
1st resistance marks are at 45.65 followed by the 50-Day MA at 46.00. Then not much resistance is seen until 50.
On the Southside, the prior 2015 low and 61.8% Fibo retracement mark at 42 is Key support, a closing break below that mark would be a very Bearish development for sure.
Brent Crude Oil’s brief move below the 45 handle and WTI Crude Oil’s short stay beneath 42.00, looks like false breakout patterns shows the lack of willingness from traders to commit fresh money at these extreme marks.
When this pattern 1st forms, prices stage sharp counter-trend moves that lasts for several days before going into consolidation and then the trend reverses for good at the end.
In the case of Crude Oil, prices rallied a good 25% off their lows before both contracts ran our of gas around their respective 50-Day MA’s. Crude Oil prices have since been falling but are still above their August lows.
Sentiment has been hurt further after the EIA reported another sharp build in US stockpiles last week and Goldman Sachs (NYSE:GS) warned that prices could collapse to 20 bbl due to massive oversupply.
This week’s inventories reports by the American Petroleum Institute (Tuesday) and EIA (Wednesday) will likely show further increases in US stockpiles because of potentially lower Gasoline demand now that the US Summer driving season has unofficially ended.
But, the market’s response to the news may be more important than the news itself.
Crude Oil has fallen this year and US gasoline demand softened. WTI Crude Oil could fall to as low as 10 bbl as the Organization of Petroleum Exporting Countries (OPEC) engages in a “Price War” with rival producers, testing who will cut output 1st.
Iran is soon to release 53-M bbl to the market and will be producing up to 1.5-M BPD in 6 months or so.
Long term outlook for both Brent and WTI Crude Oil is due South.
OPEC says it will cut production, and are going to see who can stand lower prices longest, since October of 2014 HeffX-LTN sees that Crude Oil is likely is headed for 20 – 22 bbl in the mid term.
Stay tuned…
HeffX-LTN
Paul Ebeling
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