• 2 minutes Rational analysis of CV19 from Harvard Medical School
  • 4 minutes While U.S. Pipelines Are Under Siege, China Streamlines Its Oil and Gas Network
  • 7 minutes Renewables Overtake Coal, But Lag Far Behind Oil And Natural Gas
  • 9 hours Joe Biden the "Archie Bunker" of the left selects Kamala Harris for VP . . . . . . Does she help the campaign ?
  • 2 hours Tesla Begins Construction Of World’s Largest Energy Storage Facility
  • 16 hours Trump Hands Putin Major Geopolitical Victory
  • 1 hour America Could Go Fully Electric Right Now
  • 10 hours Those Nasty White People and Camping Racism
  • 5 hours Will any journalist have the balls to ask Kamala if she supports Wall Street "Carried Interest" Tax Loophole
  • 4 hours In 1,267 days, Trump has made 20,055 false or misleading claims
  • 5 hours COVID&life and Vicious Circle: "Working From Home Is Not Panacea For Virus"
  • 1 min Candidate Biden refuses to answer questions and hides from public. If u could, what questions would you ask him
  • 36 mins Buying votes is cool now.
  • 12 hours The Truth about Chinese and Indian Engineering
  • 21 hours Brent above $45. Holding breath for $50??
  • 2 days China wields coronavirus to nationalize American-owned carmaker
  • 1 day Oil Tanker Runs Aground in Mauritius - Oil Spill
  • 2 days Open letter from Politico about US-russian relations
Why Oil Remains Stuck At $40

Why Oil Remains Stuck At $40

Oil prices posted gains once…

Russia’s Central Bank Against Copying Mexican Oil Hedge

Russia’s Central Bank Against Copying Mexican Oil Hedge

Russia’s central bank doesn’t think…

Oil Market Contango Returns In A Sign Of New Glut

Oil Market Contango Returns In A Sign Of New Glut

Sluggish oil demand recovery with…

ZeroHedge

ZeroHedge

The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Citi: Oil Prices Have Bottomed And Are Now Set To Soar

One day after Goldman issued a confused, rambling note in which the bank cuts its 3-month WTI price target by $7.50 from $55 to $47.50 saying "Spot WTI oil prices at $43/bbl are now back to November pre-OPEC deal levels, down from $52/bbl just a month ago and vs. our prior 3-mo $55/bbl forecast. How did it go so wrong?" yet kept a bullish long-term outlook (underscored by a bullish follow up note by Goldman's commodity head, Jeffrey Currie because Goldman is always hedged) and on the same day that Socgen likewise cut its Q3 and Q4 Brent forecasts by $7.50 to $50 and $52.50 (and 2018 by $6 to $54) on a weaker supply-demand outlook, oil bulls were in urgent need of reassurance.

So, courtesy of Citi, the one bank that will never stray too far from its bullish bets on crude (perhaps due to its role as OPEC's impresario to the hedge fund world), and its head technician Tom Fitzpatrick, here is the explanation why oil is now due for a rebound, or as Citi puts it...

"Oil hits the floor and is now set to soar!"

o We believe that WTI Crude has posted a short term bottom. Previous short term bottoms have typically seen strong upside follow through with an average low to high rally of 22% over three weeks.

o The present price action on WTI Crude is also very similar to that seen in October/November of last year and in that instance, we saw a rally of nearly 23% in the 3 weeks after the low was posted.

 

(Click to enlarge)

o We are very focused on the price action seen in October and November of last year where we fell for 5 weeks from a high of $51.93 to a low of $42.20. This time, we also fell for 5 weeks from a high of $52.00 and hit a low of $42.05 last week.

o The bounce after the November low saw WTI rally to $51.80 over three weeks and a similar move this time around looks likely to us. Such a move would also be consistent with the rebounds off prior lows.

o Previous short term bottoms in WTI Crude have been followed by aggressive rebounds in the 3 weeks that follow. On average these rebounds have resulted in a move higher by 22%. If last week’s low is a short term bottom (which is our bias), a bounce like the average one see over the last 18 months would suggest a move up to $51.29, in line with what we would expect to see if we follow the November 2016 bounce highlighted above.

(Click to enlarge)

o Daily momentum has crossed higher from stretched levels and similar turns higher in momentum have corresponded with major bottoms in WTI Crude. Related: Can ‘Fire Ice’ Replace Shale?

o In addition, we have now firmly taken out good short term resistance at $43.76 (May low) on a closing basis and we held that level on a retest yesterday.

o Interim resistance worth keeping an eye on in the short-term comes in around the March lows of $47.

(Click to enlarge)

o It is worth noting that net Managed Money positioning has become significantly cleaner in the last few months and a large increase in shorts has actually been seen (biggest short since the deflation story dominated the narrative in mid-2016)

o Further price appreciation in Crude could therefore see an unwind of shorts with plenty of room for longs to add to positions.

Then again, considering that exactly one week ago Citi issued a note titled "Here Comes The V-Shaped Rebound In Oil", we can see why readers may be skeptical.

By Zerohedge.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment
  • the masked avenger on June 30 2017 said:
    Yawn... once,again, the little oil guys are hoping for a big woody. Oil is slowly losing its importance. Enough big companies have been screwed by big oil long enough and are finding ways around the idiots. Oil will rise and fall and repeat the cycle. Oils heady days are past. Get a grip.
  • Bill Simpson on July 06 2017 said:
    The price will be set by how much oil Libya, Nigeria, Iraq, Iran, and Russia actually produce. They go all out, and it could stray between $45 and $65 for a couple more years. Unless WW III starts in the Middle East, which is unlikely, but not impossible.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News