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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Sellers Take Control Of Oil Markets

Oil

September West Texas Intermediate Crude Oil Analysis

September West Texas Intermediate crude oil futures are expected to close lower for the week. The market is being pressured by evidence of an ongoing fuel glut despite efforts led by OPEC to tighten the market by curtailing production.

Traders are reacting to the U.S. Energy Information Administration (EIA) report from the week-ending June 2 which showed a surprise build in commercial crude oil stocks to 513.2 million barrels. Inventories in gasoline and distillates were also up, despite the start of the peak demand summer season.

Adding to the bearishness from the EIA report is the news that refined product inventories are now back above 2016 levels and well-above their five-year average range.

Asian markets are also oversupplied, with traders continuing to put excess crude into floating storage, a key indicator for a glut. Shipping data in Thompson Reuters Eikon shows at least 25 supertankers currently sitting in the Strait of Malacca and the Singapore Strait, holding unsold fuel.

Technical Analysis

(Click to enlarge)

The main trend is down according to the weekly swing chart. If the downside momentum continues then the selling could extend into the main bottom at $44.76. If sellers take out this bottom then we could see an eventual test of the next main bottom at $42.18.

The main trend will turn up on a trade through the main top at $52.38.

The main range is $37.73 to $58.36. Its retracement zone is $48.05 to $45.61. The market is currently trading inside this range. It is controlling the longer-term direction of the market.

The short-term range is $44.76 to $52.38. Its retracement zone is $48.57 to $47.67. Holding below this zone is helping to create the downside bias.

The main 50% price falls inside the short-term retracement zone. This forms a resistance cluster at $47.67, $48.05 and $48.57.

Forecast

(Click to enlarge)

Sellers are likely to be in control as long as the market remains under the resistance cluster at $47.67 to $48.57.

The selling will get stronger on a sustained move under the major Fibonacci level at $45.61. Taking out this level could trigger an acceleration into the April 5, 2016 main bottom at $42.18.

September Unleaded Gasoline Analysis

Adding to the bearishness from the EIA report is the news that refined product inventories are now back above 2016 levels and well-above their five-year average range.

Technical Analysis

(Click to enlarge)

Forecast

The main trend is down according to the weekly swing chart. A trade through $1.4344 will reaffirm the downtrend. A move through $1.6501 will change the main trend top up.

If $1.4344 is taken out with conviction then look for the selling to extend into the next major bottom at $1.4029.

We could see some counter-trend buying come in as we near $1.4344, but it will probably be only enough to trigger another short-covering rally on the daily chart. This would set up another shorting opportunity.

September Natural Gas Analysis

(Click to enlarge)

September Natural Gas futures are bearish, but this week’s price action suggests the presence of buyers.

The main trend is down according to the weekly swing chart, but the market is forming a potentially bullish closing price reversal bottom. A close on Friday above $3.030 will create this formation. This could trigger the start of a 2 to 3 week rally.

The weekly chart pattern currently suggests that buyers are defending the main bottom at $2.903 and that the buying may be greater than the selling at current price levels.

If the bottom at $2.903 fails then look for the break to extend into $2.903 then possibly into $2.800.

If a closing price reversal bottom is formed then look for a possible rally into at least $3.239 to $3.302 over the near-term.




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