Crude prices rallied sharply in the last few days, boosted by downward revision of US oil output and hints that OPEC may consider production cuts. October 2015 futures (Nymex Light Crude – CLV2015) tested resistance at $50/barrel before falling just as steeply on weak manufacturing data out of China.
Expect another test of support at $38/barrel. Breach of support would offer a target of $26/barrel*.
*Target: 38 – ( 50 – 38 ) = 26
Long-term crude prices are falling fast, with June 2017 futures (Nymex Light Crude – CLM2017) having broken through its medium-term target of $50/barrel*.
* Target calculation: 56 – ( 60 – 54 ) = 50
The August 2015 Report from the International Energy Agency indicates that oversupply is growing. After the latest market turmoil, IEA estimates of global demand are also likely to be revised downward. Maybe that long-term target of $36/barrel** is not so crazy after all.
**Long-term target: 66 – ( 90 – 60 ) = 36
Decline of Nymex Light Crude September 2015 futures (CLU2015) is slowing as it nears the medium-term target of $40/barrel*. Narrow consolidation at this level would suggest a continuation of the down-trend.
* Target calculation: 50 – ( 60 – 50 ) = 40
Long-term June 2017 Nymex Light Crude futures (CLM2017) are consolidating in a narrow range at the medium-term target of $54/barrel*. Continuation of the down-trend is likely but recovery above $55.40 would warn of a bear market rally (not a reversal). Breach of support at $54 would offer a medium-term target of $50**.
* Target calculation: 60 – ( 66 – 60 ) = 54; ** Target calculation: 56 – ( 60 – 54 ) = 50
Expect crude prices to continue falling. The August 2015 Report from the International Energy Agency indicates that oversupply is growing. It is likely to take at least a year before balance is restored.
From Art Berman at Oilprice.com:
In its August Oil Market Report (OMR), the IEA revised 2nd quarter 2015 demand upward 370,000 bpd from its July estimate but also revised supply upward by 140,000 bpd. Total liquids supply is 96.53 million bpd and demand is 93.5 million bpd……
….The world continues to have an over-supply problem that is slowly improving but it will take another year before the market comes into balance.
Read more at IEA: At Least Another Year Before Oil Markets Rebalance | OilPrice.com.
Nymex Light Crude futures (September 2015 – CLU2015) are approaching their medium-term target of $40/barrel*. Expect support at this level.
* Target calculation: 50 – ( 60 – 50 ) = 40
Long-term June 2017 Nymex Light Crude futures (CLM2017) are testing the medium-term target of $54/barrel* — a premium of about $11/barrel over current delivery. Expect support at this level but the long-term target could be as low as $36**.
* Target calculation: 60 – ( 66 – 60 ) = 54; ** Target calculation: 66 – ( 90 – 60 ) = 36
ZeroHedge quotes Goldman Sachs’ Jeffrey Currie:
….Not only will the macro forces keep prices under pressure, but historically markets trade near cash costs [near $50/bbl] until new incremental higher-cost capacity is needed (even the IEA has revised 2015 non-OPEC output growth from existing capacity up by 265 kb/d since March). In addition, low-cost OPEC producers are likely to expand capacity now that they have pushed output to near max utilization. At the same time Iran has the potential to add 200 to 400 kb/d of production in 2016 and with significant investment far greater low-cost volumes in 2017….
Read more at Goldman Sachs Doubles Down On Lower-For-Longer Scenario | OilPrice.com.
Long-term June 2017 Nymex Light Crude futures (CLM2017) is approaching its medium-term target of $54/barrel*, maintaining a premium of about $10/barrel over current delivery. Expect support at $54, but the long-term target could be as low as $36**.
* Target calculation: 60 – ( 66 – 60 ) = 54
** Target calculation: 66 – ( 90 – 60 ) = 36
Long-term June 2017 Nymex Light Crude futures (CLM2017) broke support at $60/barrel, offering a target of $54/barrel*.
* Target calculation: 60 – ( 66 – 60 ) = 54
In the short-term, September 2015 futures (CLU15) are testing support at their March low of $50/barrel. Breach is likely, given the long-term down-trend, and would offer a target of $40/barrel*.
* Target calculation: 50 – ( 60 – 50 ) = 40
Declining prices will hurt the Energy sector in the short/medium-term, but the benefit to the broader economy will outweigh this in the longer term. Lower fuel prices will especially benefit the Transport sector. Highly industrialized exporters like Germany, Japan, China and the broader EU, will also benefit. While oil exporters like Russia, Iran, the Middle East, Nigeria, Angola, Venezuela, and to a lesser extent Norway, face hard times ahead.
The nuclear deal with Iran is likely to increase supply of crude oil, especially in European markets, driving down prices.
Brent crude August 2015 contract (CBQ15 above) is testing support at $56 per barrel. Narrow consolidation suggests continuation of the down-trend. Breach of $56 would signal a test of primary support at $53.
Nymex (WTI) Light Crude August 2015 contract (CLQ15) is in a similar pattern, with medium-term support at $51 and primary support at $49 per barrel.
Nymex Light Crude continues its sharp descent, with August 2015 futures breaking medium-term support at $54 per barrel.
The next major support level is primary support at $44.
