FUNDAMENTAL NEWS

Oil price fell nearly a percent on Monday session on the diplomatic clash between Qatar and three Arab allies. Following the OPEC meeting (May 25) oil slumps more than 10% from May high. Before retracing a percent on Monday session, Oil price rose nearly 1.5% led by tensions in the Middle East. A political rupture raises the price volatility but manages to remain above Friday low.

According to JBC Energy analysts said in a note, “While we would not want to read too much into this in terms of looming trouble for OPEC, the fact that Qatar’s stance towards Iran is a key element in this issue does make for a potentially more complicated setup at future meetings should the issue not have been resolved in due time”.

For the week ending to May 30, the CFTC) said on Friday “Hedge funds raised bullish wagers on U.S. crude oil for the second straight week to a near one-month high”. The data showed, “Money managers raised their combined futures and options position in New York and London by 17,555 contracts to 239,049” reported by Reuters.

TECHNICAL VIEWS

The weakness in recent prices coupled with the scale of growth in US drilling activity. As we forecast in our last article, the price tested our potential support finds at 48.50, low made at 48.60 and spotted with a positive divergence on the four-hour chart. Brent oil price retraces more than 70% (46.32-54.55 rally) likely to place a bottom between 48.50 and 47.80 levels.

 

We forecast a rebound to 49.30 and 49.50 in a day or two as the hourly oscillator remain bullish. The bulls must propel above 49.80/50.00 to escape further correction, in this case 50.40/50.60 and 51 are highly likely. Alternatively, fails at 48.50 additional support finds between 48.10-47.90.

 

We forecast an inverted H&S pattern on the daily RSI.

According to HSBC analysts, “Our new assumptions are for average Brent prices of USD56/b in 2017 (vs USD60/b), rising to USD65/b in 2018 and USD70/b in 2019, vs our previous expectation of a return to USD75/b by 2018”.

It is important to always keep in mind the risks involved in trading with leveraged instruments.

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