Crude: Bears Vs. Bulls- Who’s Winning?
No doubt about it, yesterday was ugly for the global crude market. West Texas Intermediate (WTI) crude declined $2.09 to $95.50 a barrel. Not to be outdone, Brent crude plummeted a whopping $2.91 to $102 a barrel.
As you’re likely aware, WTI is the American crude benchmark while Brent is the European counterpart.
What sent these commodities off a cliff?
A recently released GDP report revealed the German economy actually shrank in the second quarter, defying economists’ predictions. Since Germany is essentially the growth engine of Europe, the GDP downturn has investors fretting over a possible Eurozone recession.
Of course, when economic growth weakens, so does the demand for crude.
Adding fuel to the recession talk is the quickly growing Ukraine crisis. Unfortunately, investors woke to news of a Russian incursion into Eastern Ukraine this morning. According to various news sources Ukrainian forces attacked the armed Russian convoy, which was supposedly delivering “humanitarian” aid.
Despite yesterday’s recession fueled selloff, today’s newfound geopolitical uncertainty has both WTI and Brent on the upswing. In fact, as I write, WTI is up $1.37 while Brent is up $1.25.
Without question, there’s a multitude of opposing factors tugging at the oil market right now.
European gloom and doom and ample US supply are on one side, while geopolitical uncertainty is on the other.
Who’s winning this battle?
Given the fact WTI and Brent are down $10 and $13 a barrel respectively since June, it’s fair to say bears have been in complete control of the market. And as long as all this geopolitical mumbo jumbo doesn’t lead to supply disruptions, it may stay that way a while longer.
But keep in mind, both WTI and Brent are nearing strong technical support…
As you can see, bears have been in complete control for weeks now. But they’ve driven these markets so low that bulls will find the risk/reward quite tempting at the green lines in the chart above.
What do you do with all this information?
While it may seem tempting to jump on the short side of the crude market, you’ve missed your chance. These markets are too close to important pivot points for a good risk/reward short trade.
On the other hand, the depth of the market pullback has bulls ready to step in.
Until Next Time,
Justin Bennett
Category: Brent Crude, Crude Oil
