The price of crude oil was weak last week. Crude oil dropped from $53.20 early in the week to $49.62 on Friday. That's a 6.7 percent drop in a week, rather significant even for a volatile asset like crude oil.
What’s our crude oil forecast for May 2017?
Examining that question is interesting, as it brings up the key reason why we do not tend to focus on fundamental data when forecasting. If we would be looking into fundamental data, in particular oil supply/demand, we would conclude that lower crude supplies would result in a higher price, according to the data from this report.
We warned readers earlier this year that crude oil was stuck at $52, and that it could imply a medium term top. So far, that forecast has proven to be very accurate. It certainly is in line with the important decisive price points we identified last year in our crude oil price forecast 2017.
The truth of the matter is that crude oil has been going sideways for a year now, as seen on the chart below. Support kicks in at $42, resistance is the $52 to $55 area. In between that area, crude oil is simply neutral.
Given the current chart setup, it is very likely that crude continues to trade within that area in the coming weeks. In other words, our crude oil forecast for May 2017 is neutral, it should continue to trade in between $42 and $52.
The most concerning observation on the chart is the sharp decline in 4 weeks time. Note how crude fell sharply in the second week of March as well as in the second week of April. That has not really happened over the course of the last 12 months. It is certainly not a bullish sign, as some other analysts have suggested that crude could rise to $70 in the short to medium term.
