Rig Count Increase Does Not Markedly Affect Oil Prices
The active rig count is constantly advancing in the US while oil prices remain at the same relatively high level with barely rising production volumes. Will WTI prices advance?
The active rig count rose in US by 20 units in a week to March 24, 2017, according to Baker Hughes oil service company. This is a record increase since January. Rig count has been rising for 10 straight weeks having reached 652 units. The US count was just 372 a year ago on March 24, 2016. At the same time, WTI oil cost $40 a barrel versus $47.7 now. Thus, a higher rig count not only does not weigh on prices, but WTI manages to get dearer. This is quite real in the case of the depletion in the shale fields and, agreeably, in case of lower production volumes.
On the daily chart, oil has reached the support of the rising trend and is struggling to bounce up from it. The further price increase is possible in case of lower production increase in the US and if OPEC maintains production.
- The Parabolic indicator gives bearish signal. It may serve the additional level of resistance, which has to be overcome to open long position.
- The Bollinger® bands have widened a lot which manes high volatility.
- The RSI is in the oversold zone. It has formed positive divergence.
- The MACD gives bullish signal.
The bullish momentum may develop if oil surpasses the last fractal high, 200-day moving average and the Parabolic signal at 50. This level may serve the point of entry. The initial stop-loss may be placed below the last fractal low at 46.5. Having opened the pending order, we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 46.5 without reaching the order at 50, we recommend cancelling the position: the market sustains internal changes, which were not taken into account.
Technical Summary
- Position: Buy
- Buy stop: above 50
- Stop loss: below 46.5