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WTI Crude Oil Outlook For June 18-22

Oil prices showed exceptional volatility over the past five days, including a late-week correction. Friday’s session brought sellers to the market in droves, driving price to a test of the $64.25 handle. The $2.50+ selloff prompted a negative weekly close for July WTI futures. It appears the post-Memorial Day WTI crude oil outlook continues to favor the bears.

WTI Crude Oil Outlook: Fundamentals

Questions surrounding supply/demand levels are always front-and-center in the crude oil market. While we have weekly metrics breaking down current supply levels, geopolitics and dialogue from producers often throw active traders for a loop. The coming week is likely to be one where the markets are playing catch up to the news cycle.

If you are trading USOIL, UKOIL, WTI, or Brent futures, then there are three items to be aware of for the coming trading week:

  • Rollover: WTI futures are preparing to roll from the July to August contract. Volume dilution was 4/3 in favor of July on Friday. Look for August to take control Monday, or Tuesday at the latest.
  • Inventory Cycle: If you have followed FX Leaders for any period of time, then you are familiar with our weekly coverage of the API and EIA inventories reports. Last week gave us a major surprise, with the API number coming in at 0.833 million and the EIA report -4.143 million. This week, EIA inventories are projected to be -1.033 million.
  • OPEC: The coming meeting of OPEC and non-OPEC producers on June 22-23 is set up to be a real market mover. Taking place in Vienna, Austria, the players in global oil are scheduled to hash out details regarding future production. The nations of OPEC, Russia, and independent U.S. shale producers will be present.

Unwinding the stated production cuts is thought to be the primary topic of discussion at the meeting. Friday’s correction in WTI pricing illustrates that this notion may be correct.

WTI Crude Oil Outlook: Technicals

Last week featured four positive days leading up to Friday’s correction.

July WTI Crude Oil Futures (CL), Daily Chart
July WTI Crude Oil Futures (CL), Daily Chart

The key element to be aware of on the daily timeframe is the test and rejection of the 78% Macro Retracement ($64.19). This area is set up as a Swing Low on the daily time frame as well a macro support level. It also has a special significance on the weekly chart below:

July WTI Crude Oil Futures (CL), Weekly Chart
July WTI Crude Oil Futures (CL), Weekly Chart

The location of the weekly Bollinger MP ($64.15) also gives credence to the $64.25-$64.00 area serving as robust support. In the event that we see a definitive break below this level, a test of the Weekly SMA ($62.60) is highly likely.

Bottom Line

By looking at the weekly chart above, you can see just how important the $65.00 level has been for the last two weeks. In fact, it has also played a key role in the pricing of August WTI futures as well. $65.00 has consistently drawn heavy two-way action, facilitating market consolidation. From a macro perspective, it appears crude oil is ready to move directionally. The coming OPEC meeting is the likely catalyst for that move.

An interesting side note has several key players in the North American shale play scheduled to address the OPEC conference. Hess, Continental, and Pioneer will comment upon the current market dynamic and production situation in North America. Shale oil is widely viewed as staunch competition to traditional global oil producers. Tensions may run high as everyone scrambles to capitalize on $65 crude and avoid a return to $50.

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Shain Vernier
US Analyst
Shain Vernier has spent over 7 years in the market as a professional futures, options and forex trader. He holds a B.Sc. in Business Finance from the University of Montana. Shain's career includes stretches with several proprietary trading firms in addition to actively managing his own accounts. Before joining FX Leaders, he worked as a market analyst and financial writer.
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