Another Bullish Run For Oil Prices Today?
What’s In Store For Oil Prices Today?
It has been an incredible bullish run for West Texas Intermediate (WTI) crude the past few weeks. In fact, on Tuesday the commodity rallied over $60 a barrel for the first time this year.
The recent upturn has WTI up 10% on the year and up 40% from the March 2015 low!
Of course, Commodity Trading Research readers are always kept abreast of twists and turns in the oil market.
As you know, I suggested this geopolitical situation had the potential to send crude sharply higher- which it did.
We also touched on the possibility of an additional price upswing in mid-April, when WTI was trading at $56.
But with crude now trading at 2015 highs over $60 a barrel, what’s next?
Will the commodity be trading at $70 soon? Or will bears retake control and send crude crashing back into the $50 range?
Let’s find out…
Oil Prices: Upside Limited… For Now
Part of the reason WTI received such a strong bullish jolt on Tuesday was the fact Saudi Arabia boosted prices to the major markets they supply.
The de facto leader of OPEC raised their official selling price to refineries in the US and Europe, while keeping them steady in Asia.
That’s good news for oil bulls because it means the Saudis likely see global demand picking up.
But that’s not the only thing sending crude higher…
Wednesday morning’s EIA oil inventory report revealed a very surprising result.
For the first time since early January, US crude stockpiles declined on the week. In fact, inventories fell by 3.9 million barrels for the week of May 1st due to a sharp decline in imports.
The news sent WTI rallying slightly over $62.50 a barrel yesterday morning.
Clearly, bulls are finally getting the fundamental signs they need to be more confident in the oil market. Not only is US production starting to weaken due to the massive US drilling slowdown, but the Saudis are increasing prices.
But before you log into your brokerage account and establish a bullish oil position, keep reading…
Despite the fact fundamentals are turning in favor of the bulls, don’t expect smooth sailing for crude. The relatively quiet upward trend of the past few weeks will likely deteriorate into another volatile trading pattern like we saw in February and March.
Here’s why…
First of all, there’s a very important OPEC meeting coming up in June. And while some members are certain to demand a production cut from the Middle Eastern oil cartel, it’s very unlikely it happens.
In other words, OPEC will likely keep the market very well supplied, as they are now.
Secondly, with oil trading into the $60 range, there’s a growing possibility US shale producers start firing up their fracking operations again.
Some companies in the lower cost basins have publically stated they’ll restart operations when crude hits the mid-$60 range. Of course, this factor has the potential to weaken oil bulls’ resolve.
Finally, a large portion of the recent gains in the oil market is due to increasing uncertainty surrounding the Yemen war. If this tense situation simmers down in coming days, investors will likely react by sending oil lower.
As you can see, despite being driven into their caves in recent weeks, crude oil bears have plenty of developing catalysts to bring them back into the light.
Let’s wrap this up with a chart…
As you can see, WTI is approaching a very important technical resistance area (red line). At the very least, the commodity will see a bit of turbulence as sellers enter the market.
In a worst-case scenario, we may see crude fall back into the mid- to high-$50 area.
Remember, there are plenty of ways to play the oil market via exchange trade funds (ETFs). I put together a comprehensive list of the best ways to play oil and other energy commodities here.
Until Next Time,
Justin Bennett
BIO: Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com. With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them. Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.
