Residual Bullishness for Crude but Prices Appear Overdone

September 26, 2017 9:26AM CDT

With crude oil prices starting out the trading week with a rather sharp rally and trading at the highest price since the end of May, it would appear as if the market is buying into the prospect of an extension of the oil producer’s output constraint program. However, the market is also embracing the reality of expanding demand from China. Not surprisingly, the market is also focusing on the argument from OPEC that the world oil market is balancing, especially given a recent “pattern" of declines in US rigs operating as that could be hard evidence that US oil supply expansion is set to level out. Adding into the upward track in prices is the prospect that Russia is establishing closer energy ties and increasing exports to China, as that could leave prior Russian oil customers seeking other supply sources.

NOV Crude Oil: With nearby crude oil prices climbing back above the $52.50 level and the latest net spec and fund long in crude oil weighing in at 475,000 contracts, it might not take much in the way of further gains for crude oil to reach overbought territory. However, the market is still bullish, powering a breakout run up from congestion. Yesterday’s rally hit the 5180 target, but holds potential for additional rallies to 5260+/-. Any corrective congestion contained to the upper edges of yesterday’s run will remain aligned for rallies. Only a close under 5070 signals a topping turnover. 

 

Nov '17 Crude Light Daily Chart

Nov '17 Crude Light Daily Chart

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