July Crude Oil rallied on Monday, June 06, 2016, trading up to 49.90 after once again testing the upward sloping trendline at 48.62 and finding support. Today’s low was 48.71 which was first established early Sunday evening.
Reports of continued attacks in Nigeria are causing severe supply disruptions in that country. The militant group calling themselves the Niger Delta Avengers has successfully thwarted attempts by the Nigerian army to halt their attacks and it stated the goal is zero production from the region. Abu Dhabi stated that Crude Oil prices can climb to around $60 a barrel as the various supply disruptions we have seen are causing the glut to contract much quickly than expected.
Saudi Arabia has raised prices to Asia and the US for July as the Saudi Oil minister says demand is strong. Iran will keep producing oil and is nearing its pre-sanction levels more quickly than expected, meaning it is nearing its maximum capacity. Iraq production has also been improving and the Saudis are adding production too. This has prevented the supply disruptions from becoming a mess.
With the rising prices, US shale producers are starting to come back. Last week saw the rig count numbers go up by 9 rigs to 325 rigs. This is much lower than last year at this time when there were around 640 rigs in operation.
This is the second time rigs increased this year and if prices stay in this area or go higher it will encourage more shale producers to add rigs and start up operations. Will this cause another big supply glut?
I think aggressive traders can buy a breakout in crude above Monday’s 49.90 high looking for price to test resistance at 50.21 and then 50.92. Place your stop in an area appropriate for your account size and risk tolerance.
- High 49.90
- Low 48.71
- Last 49.71
Daily Pivots for 6/7/16:
- R2 50.63
- R1 50.17
- PIVOT 49.44
- S1 48.98
- S2 48.25