Crude Oil On the Week: Bulls win on the Week, BRENT outpaces WTI

By Chinedu Okoye 



Crude on the Week:

Crude Oil futures saw a bullish trend in the week as they retraced (as expected) to range support levels, with BRENT currently at $75.17 and WTI at $70.70. this is in contrast to last weeks bearish move which saw crude close below support for WTI and BRENT just above support by 5 cents each.



Though Both benchmarks mirrored each other's movement, BRENT was high bid by 10 basis points, taking the spread to $4.47 beyond resistance levels. The spread stayed above $4 the whole week.


CRUDE PRICE MOVEMENTS (at the close from October 25th through November ):   
                  01/11    |  08/11     |15/11    |22/11
BRENT:     $73.65     $73.87    $71.05    $75.17
WTI:          $69.64     $70.38    $66.95.   $70.70
AVG:         $71.65     $72.13    $69.         $72.93
SPREAD:   $. 3.61      $3.49     $4.10.     $4.47



Technical Analysis:

Crude is above the 50-day and 100+day Moving Average (MA), and just under the 20-day MA. The 50-day MA being less than the 20-day but higher than the 100 and 200-day MA indicates a bullish signal.

               20-day |  50-day   | 100-day | 200 -day
WTI:       $70.74  $70.47      $69.94      $69.57
BRENT:  $74.73  $74.52      $73.98      $73.57

For both benchmarks, the the 50-day MA have crossed above the 200-day MA a technical bullish signal, this is highly suggestive of strong support for crude prices at these levels, and the increase in average price of both benchmarks further affirms this.

This is in line with our expectations for crude (long-term), as we expect crude to breakout out of the current range at higher support and resistance levels. But we expect a retracement to follow this week's.

(Crude Oil Futures at close October 25th + November 22nd).



Fundamental Indicators:

A combination of fundamental factors are also fueling this rise. But show mixed signals. Though geopolitical tensions are still very much on, the impact on supply seems to be muted.


OPEC and US Inventory;

The market has now shifted focus to OPEC plus decision next month. Given further demand volatility, and expectations of an increased US supply, may lead OPEC to either cut or hold supply qoutas for the thrd time this year.

US Inventory drawdowns last week also suggest tighter supplies and is also supportive of the rally seen in the week. US crude inventory has declined steadily in the past two weeks by a total of 6.7 million barrels.

In the week leading up to November 15, US invetories saw a 4.3 million drawdown taing it 6% below five year average. Last week the IEA reported a further 2.4 million drawdown more than the anticipated 1.5 million.

Headwinds:
However weak economic data out of Europe, China –key markets create mixed signals and will probably keep a lid on demand recovery.




Concluding Remarks and Expectations Going into the Last Week of November:

The US Inventory data somewhat muted the expectations of higher US Oil supply, and OPEC may respond to expected demand weakening, by cutting or holding production for longer. 

Weakness in economic data out of major buyer countries makes for a bearish outlook. This creating a mixed outlook —based on fundamentals. This has resulted in the sustained range bound movement in the support resistance range.

The market remains supportive at the prescribed support levels but looks poised to break above in the coming months. With spreads widened above resistance and WTI just under resistance, we anticipate a retracement of the spread in the opposite direction in the coming week.

This retracement could be as a result of a higher increase in US crude relative to BRENT should prices move upwards or a lesser drawdown seen as BRENT is already $2.17 above resistance and WTI $0.43 below resistance.

We expect the latter scenario to occur in the coming week but do not see a dramatic shift from. The current levels or above range. 

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