Shares of ASX oil names are under pressure in early trade as West TexasIntermediate Crude Oil (WTI) prices dropped over 4% overnight.
WTI prices fell by close to $4.00 per barrel to $70.40 as a confluence of bearish news hit the market.
Increased trade friction between the US and China pushed WTI lower in Asian tarde, while news that Liyba and Saudi Arabia have increased production by a combined 800,000 barrels per day pushed the market through key support levels.
As illustrated in the chart below, WTI has rallied more than $10.00 over the last 5 weeks, which now places initial support $3.00 lower near $67.00.
Similarly, local oil names, OSH, STO, WPL and ORG have rallied over the last month and appear to have more downside price potential over the near-term.
OSH will announce their quarterly production report next Tuesday and STO and WPL will release their reports next Thursday.
We have traded both sides of these names over the last 12 months and will update with specific entry levels near lower technical support areas over the medium-term.
Since posting an intra-day low of $55.80 on December 6th, the price of West Texas Intermediate (WTI) crude oil has rallied almost 20% to hit a 3-year high of $66.60 in NY trade last night.
The sharp rise in WTI has had 2 primary tailwinds: a seasonal drawdown of crude oil in storage and a 4% drop in the USD Index.
However, this week’s events could diminish, or possibly reverse, those 2 market impulses.
According to the American Petroleum Institute (API), the amount of WTI in storage has dropped for 11 consecutive weeks. This week’s drawdown was 1.1 million barrels compared to an expected reduction of 2.3 million barrels.
In addition, the recent rise in WTI has seen the US rig count rise from 789 in early December to 939 this week. More production from rigs online will likely break the string of weekly drawdowns in the near-term.
With respect to the USD, Mr Trump told CNBC yesterday that the Greenback will strengthen over time and that recent remarks made by Treasury Secretary Steve Mnuchin about a weakening USD were misunderstood.
Our ALGO engine currently has a sell signal in OSH from the $7.60 area. A material correction in the WTI price could see the stock trade back to November support level near $7.00.
Spot Crude Oil prices fell sharply in overnight trade after a report from the International Energy Agency (IEA) said that global oil demand is much weaker than OPEC consensus figures and will weaken further in 2018.
The report also showed that US shale, and other non-OPEC producers, will add an additional 1.4 million barrels per day of supply on top of the fall in demand.
These comments pushed the front-month WTI Crude contract down over 2% to $55.10.
Oil traders have gained confidence in the rebalancing effort lately, with impressive OPEC compliance and a high likelihood that the cartel extends its production cuts, perhaps through the end of 2018, when they meet later this month.
We continue to like WPL and ORG as our preferred buy-side opportunities.
Prices of West Texas Intermediate (WTI) Crude Oil moved higher in New York trade, extending the recent rebound to a sixth straight session after a decline in US crude production eased concerns about deepening oversupply.
WTI futures settled up 19 cents at $44.93 per barrel after hitting a two-week high of $45.45 earlier in the day.
Supply disruptions in the Gulf of Mexico from Hurricane Cindy, as well as, increased demand for gasoline in front of the long July 4th weekend have also supported the move higher in Crude.
On June 23, we posted a report suggesting Crude Oil prices had become technically oversold and a reversion higher was likely. We are still looking for a extension of the move higher into the $46.50 area.
Investors looking to profit from higher Crude Oil prices can look to buy the BetaShare ETF with the symbol: OOO.
We started adding OOO to client portfolios in the $12.30 area.
We calculate that when WTI trades back to $46.50, the price of OOO will be near the $14.60 level, which is a reasonable area to take profits.
The FOMC announcement to raise the target Fed Funds rate by 25 basis points to 1.25% was largely priced into the market.
However, the “hawkish” guidance about further upward adjustments and the specific plans to reduce the FED’s $4.5 trillion balance sheet have raised concerns about current stock market valuations and the impact of tighter monetary conditions.
The major US indexes were mixed with the NASDAQ down .50%, THE Dow Jones 30 up .25% and the SP 500 down .10%.
US Energy stocks were all lower as Crude Oil prices slumped on a downbeat assessment from the IEA and increased production from both the US and OPEC nations.
The front month WTI Crude contract closed down over 3% to $44.65, which is the lowest closing price in over 18 months.
As a result, shares in both BHP and Oil Search have opened more than 2.5% lower.
West Texas Intermediate Crude Oil prices dropped below $48.00 for the first time in over a month as rising output in the USA, Canada and Libya have more than offset the production cuts agreed to by OPEC members last November.
At one point in the NY session Crude prices were over 3% lower to $47.40 before weekly US inventory data lifted the market back over $47.90.
we have been following the BetaShare Oil ETF called OOO. It has traded in a wide range between $17.50 and $13.80 this year as crude prices have fluctuated.