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Crude Oil Supply concerns casting a shadow on Price action

Price action rallied due to summer effect

Crude oil prices are now driven by macro-economic supply – demand factors. Finally Price action is making sense for traders. Recent data from US shows crude oil inventories drop by 7.84 million barrels, largest draw since September 2016. The main theme behind the recent move has to do with summer effect. Crude oil rallied from 43$ per barrel to 50$ per barrel because of the impact. But Supply concerns are coming to surface as summer season nearing its end.

US crude output intended to raise by average 0.02 million barrels a day this year (9.35 million vs 9.33 million previous estimates per day) and 9.91 million barrels a say in 2018. EIA raises both its 2017, 2018 US Crude output forecasts. Increasing supply might depress the Prices again. The recent rally turns out to be a seasonal factor.

Current Market Effect: Price action is trading near 50$ mark, it’s a decision point and potential resistance level. It all boils down to how buying pressure reacts – whether or not prices can sustain above 50$ mark. In terms of OPEC, the organisation suggested Saudi Arabia to supply lower volumes of crude oil requested Asian importers to help them control the prices to some extent. Nigeria has also agreed to stop increasing its output once it reaches a steady daily average of 1.8 million barrels per day which should allow the markets to find equilibrium.

Present market structure and looming supply concern indicates to play downside. Also risk: reward for the trade seems pretty good. If we see any strong rallies or bullish sentiment, then we will change the trading plan according to developing price action. OPEC involvement is a risk factor for bears.


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About the Author:

Balaji is a Speculator, Investor and Trader (All in All!!!) and self published author. Trading in the Markets since decade, have seen more ups and downs along with institutional trader's lifestyle. He usually trades Nifty, Bank Nifty, Commodities, Futures cum Options around both Indian and global Markets. Balaji applies highly analytical and systematic Price Action strategies He blogs passionately about Trading strategies, Price Action Trading, Technical analysis, Macro events, Market setups, Financial and Economical topics. Apart from Trading and Blogging, Balaji also mentors aspiring Traders and Investors on becoming successful in highly competitive financial Markets.

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