Nymex December Light Crude is consolidating above the new support level at $50/barrel. Respect is likely and would confirm the primary up-trend. Target for an advance is $56/barrel*.
* Target: 50 + ( 50 – 44 ) = 56
Crude tests key level at $50
December Light Crude is retracing to test new support at $50/barrel after the recent breakout.
If we look at the longer term weekly chart we can see how important this level is. Respect of $50 would confirm the primary up-trend. There is still doubt that support will hold — and that OPEC will be able to craft an agreement that will satisfy members while restricting supply. Failure would suggest that crude will revert to ranging between $40 and $50.
OPEC deal a fake
OPEC announced an agreement to cut production — to between 32.5 million and 33 million barrels per day from current levels of 33.2 million barrels — without agreement as to which members will bear the brunt of the production cuts. FGE Chairman Fereidun Fesharaki calls this “a fake deal” and explains that OPEC could not afford to come away from Algiers empty-handed.
http://video.cnbc.com/gallery/?video=3000555509
Nymex Light Crude rallied to $48/barrel and looks set to test resistance at $50. Breakout above $50 would signal a primary up-trend but respect is more likely, once the market gets past the headlines, and would suggest further consolidation between $40 and $50.
Crude testing $40
Light Crude (September contract) is testing medium-term support at $40/barrel. Breach of support would signal a test of primary support at $33 to $34. Respect of support, on the other hand, would indicate another test of resistance at $50. And breakout above $50 would signal a primary up-trend.
The long tail and strong volume at $40 suggest that support may hold. But I wouldn’t bet the house on it. Especially when gasoline inventories have surged, the US rig count is rising …..and demand is set to fall.
Gasoline stocks rise
More from Tyler Durden:
As the chart below shows, gasoline stocks rose 0.5 million bbls last week to 241Mm bbl and is now 11.8% higher than last year.
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
Oil Crashes To $41…… | Zero Hedge
Tyler Durden suggests that crude oil prices will fall in the second half of 2016:
Tracking last year’s pump-and-dump of hope perfectly.
As demand is set to tumble…
Source: Oil Crashes To $41 Handle After Surprise Inventory Build, Production Rise | Zero Hedge
US rig count rises
The recent peak in crude prices coincides with the bottom for the US oil rig count (discussed Monday).
Gold strengthens as Dollar weakens
Long-term interest rates continue their decline, with 10-year Treasury yields testing support at 1.65 to 1.70 percent. Breach would signal a test of the all-time (July 2012) low of 1.40 percent.
Gold rallied in response, breaking initial resistance at $1250/ounce to signal a test of $1300.
The Chinese appear to have resumed selling foreign reserves to support the Yuan, with USDCNY running into resistance at 6.60. PBOC sale of reserves would weaken the Dollar, boosting demand for Gold. Failure to support the Yuan is unlikely, but would increase safe haven demand for Gold from Chinese investors.
The Dollar Index, representing predominantly the Euro and Yen crosses, fell sharply. Breach of support at 93 would confirm the primary down-trend earlier signaled by 13-week Momentum below zero.
The Australian All Ordinaries Gold Index broke through 4500 to signal another advance, with the weakening Australian Dollar adding further impetus. Gaps between trough lows (orange line) and preceding highs (brown line) indicate strong buying pressure.
Disclosure: Our Australian managed portfolios are invested in gold stocks.
The ‘black swan event’ that could send oil to $US25 a barrel | Business Insider
From Elena Holodny | May 24, 2016, 10:13 AM
Both WTI crude and Brent crude were around $US48 per barrel on Monday, well above their lows below $US30 per barrel earlier this year. But all of that may come crashing down if one “black swan event” transpires, argued a Bank of America Merrill Lynch global commodities research team.
From their recent note to clients (emphasis ours): “Global GDP in US dollar terms at market exchange rates is stagnant. Continued US dollar strength could force Saudi Arabia either to cut oil production modestly and push Brent back to $50 or de-peg the Saudi riyal, our black swan event, which could lead Brent to collapse to $25/bbl.”
While this certainly sounds ominous for the oil market, it’s worth noting that analysts and financiers are split on whether the Saudis will actually de-peg their currency and undo the current fixed exchange rate with the US dollar….
Source: The ‘black swan event’ that could send oil to $US25 a barrel | Business Insider
Oil turns lower as greenback rallies on Fed minutes
From Mark Shenk:
Oil dropped from a seven-month high as the US dollar surged after the Federal Reserve published minutes of its latest monetary policy meeting suggesting a June hike is possible. Commodities fell as the Bloomberg Dollar Spot Index, which tracks the US currency against 10 others, surged. The April minutes showed that policy makers saw an interest-rate hike appropriate in June if labour markets and economic growth continued to strengthen…..