CRUDE OIL FUNDAMENTAL FORECAST: BULLISH
Supply constraints, rebounding global demand and rising inflation expectations may drive crude oil costs higher in the long run.
Break over 2008 uptrend tips at additional gains for oil rates.
Supply limitations have sent crude oil prices storming greater in recent days, as OPEC+ stunned market participants by choosing to keep its present output settings stable, despite formerly contemplating introducing an extra 1.5 million barrels a day of output following month. Even more surprising was the statement from Saudi Arabia that it would create the 1 million barrel-per-day voluntary creation cut it released in February open ended.
This amounts to the cartel withholding 7 million barrels-per-day from the market, and might open the door for crude oil prices to keep on gaining ground in the near term. Maintenance works at three of Western Canada's major oil sands producers will also tighten global supplies farther, with a reduction of 500,000 bpd anticipated next month.
Growing inflation expectations might also serve as a tailwind for crude petroleum prices, as the accelerated rollout of coronavirus offenses, decreasing infection rates, and extensive fiscal support fuels speculation that an acceleration in consumer price increase is on the horizon.
Truly, 5-year breakeven inflation rates have surged to the highest levels in over a decade, and appear to have dragged oil prices along for the ride.
Therefore, increasing inflation expectations, provide limitations, and rebounding demand can pave the way for crude oil to expand its latest surge higher in the coming months.
From a technical standpoint, the outlook for primitive seems skewed to the upside down since cost surges above emotional immunity at 60.00 and pierces through the downtrend extending out of the 2008 high.
With the RSI storming into overbought territory, and the MACD rising to its greatest levels since 2011, the path of least resistance seems greater.
A weekly close above the 2019 large (66.58) would probably intensify buying pressure and carve a path for cost to challenge the 2018 high (76.88).
But if 66.50 holds firm prices may enter a period of consolidation over the emotionally imposing 60.00 markers, before resuming the key uptrend extending in the March 2020 nadir.
CRUDE OIL DAILY CHART -- ASCENDING CHANNEL GUIDING PRICE HIGHER
Zooming to the daily chart reinforces the bullish prognosis depicted on the weekly timeframe, as crude oil continues to track constructively within the confines of an Ascending Channel.
With prices hovering above all six moving averages, and the RSI eyeing a push into overbought territory, additional gains show up in the offing.
A daily close above psychological immunity at 65.00 would likely coincide with the RSI jumping above 70, and probably lead to costs climbing to challenge key resistance at the 2019 high (66.58).
Alternately, if 65.00 successfully neutralizes near-term selling strain, a counter-trend pullback to confluent support in the 8-EMA and February 18 large (62.25) could be on the cards.
IG CLIENT SENTIMENT REPORT
The IG Client Sentiment Report reveals 35.86% of traders are net-long using the ratio of traders short to extended at 1.79 to 1. The number of dealers net-long is 25.61% lower compared to yesterday and 11.74% lower from a week, while the amount of traders net-short is 25.30% higher than yesterday and 3.31% higher from last week.
We typically take a contrarian view to audience sentiment, and also the fact traders are net-short indicates Oil - US Crude prices will continue to grow.
Traders are further net-short than yesterday and a week, along with the blend of present sentiment and recent changes gives us a stronger Oil - US Crude-bullish contrarian trading bias.
