July crude oil sold off as US traders came on board on Thursday morning (June 2) testing trendline support at 48.01 as it traded down to 47.97 on OPEC’s failure to agree on any production limits at its semi-annual meeting in Vienna. OPEC’s next meeting will take place on November 30, 2016.
This was pretty much the expected result as OPEC hasn’t been able to agree on anything and even when they do agree they cheat. Price once again respected the upward sloping trendline support and traders awaited the EIA report which was delayed due to the Memorial Day holiday on Monday.
The report came out at 10am CT and showed overall inventories declining by 1.36 million barrels, less than the expected decline of 2.5 million barrels. Cushing inventories declined 704,000 barrels. The market was expecting a 500,000 barrel decline. Gasoline supplies also dropped more than expected. The decline was 1.49 million barrels, much more than the 350,000 barrel decline expected.
To top it off US production continued its downward path, declining to 8.735 million barrels pd. Crude rallied on the news trading up to 49.39, but unable to overtake the overnight high of 49.47. Crude drifted lower and settled at 49.17.
After settlement, crude languished and ended the day at 49.06. The past two days saw crude test trendline support twice and it was unable to break down any further. It formed two small bodied candles in the process showing the indecision in crude oil as price has consolidated between the May 19 low of 47.26 and the May 26 high of 50.21. I think aggressive traders can buy a break out above today’s high of 49.47, looking for a rally to test the high up at 50.21.
Place your stop according to your account size and risk tolerance. If crude isn’t able to trade above the high, look for a re-rest of the trendline which comes in at 48.33 for Friday’s trade. If crude oil is able to push through the trendline, look to be short for a test of the 47.28 low. Place your stop accordingly.
CLH16
High - 49.47
Low - 47.97
Last - 49.06
Daily Pivots for 6/3/16:
R2 50.33
R1 49.70
PIVOT 48.83
S1 48.20
S2 47.33