Is oil about to take off?

Discussion in 'Forex Signals' started by myfxpt, Sep 15, 2017.

  1. myfxpt

    myfxpt Master Trader

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    Is it time to get long in oil? Daily breakout is backed by EU and US demand, and historically high Gold-Oil Ratio. Oil is way under priced.
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  2. myfxpt

    myfxpt Master Trader

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    Price is currently $52.60 for XTIUSD, up $2.93 a barrel or $293 per standard lot. So, does oil have potential to move higher?

    According to OPEC, world oil demand growth in 2017 is now expected to increase by 1.5 mb/d, representing an upward revision of around 30 tb/d from last previous report, mainly reflecting recent data showing an improvement in economic activities. Positive revisions were primarily a result of higher-than-expected oil demand from the OECD region and China. In 2018, world oil demand is anticipated to grow by 1.4 mb/d, following an upward adjustment of 30 tb/d over the previous report, due to the improving economic outlook in the world economy, particularly China and Russia.

    Non-OPEC oil supply is expected to grow by 0.7 mb/d in 2017, following a downward revision of 0.1 m/bd from the previous report. In 2018, the growth in non-OPEC oil supply saw a downward revision of 60 tb/d to stand at 0.9 mb/d. OPEC NGLs and non-conventional liquids production are seen averaging 6.5 mb/d in 2018, representing an increase of 0.2 mb/d, broadly in line with growth in the current year. In September, OPEC crude oil production increased by 88 tb/d, according to secondary sources, to average 32.75 mb/d.

    So, if I am reading this correctly it would seem that whilst demand for oil is on the increase, supply is contracting.
    What happens when demand exceeds supply?
     
  3. myfxpt

    myfxpt Master Trader

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    What happens when demand exceeds supply? Price is now $55.80 for XTIUSD, up $6.13 a barrel or $613 per standard lot.

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  4. myfxpt

    myfxpt Master Trader

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    One day later...up $28,000 on this trade (Forex4You account).

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  5. myfxpt

    myfxpt Master Trader

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    Weekly perspective looks good. The Gold-Oil ratio signals a buy for me. The ratio is telling me that oil is undervalued compared with its historical ratio of around 15 barrels of oil to an ounce of gold. Plus, the breakout above resistance is an obvious eye-opener. The fundamentals suggest a rise in the price of oil as world economies recover, particularly given that production has dropped. Oil is under priced. Further price rises will nudge the ratio back towards the 1:15 historical ratio average. If it gets there at the current gold price, oil should fetch around $85 a barrel.

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  6. myfxpt

    myfxpt Master Trader

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    Is Oil ready to retrace a little?
    This zoomed-out H4 chart shows a powerful breakout above resistance with solid follow through, which confirms the fundamental factors currently at play, i.e. under-supply. But price action is starting to look a bit exhausted and may retrace, despite both MRSI and Gold/Oil Ratio clearly indicating that a strong uptrend is in progress. I would be prepared to buy a breakout above the latest resistance level, and equally prepared to exit on a return below it.

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    Same chart zoomed in.
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    LONDON (Bloomberg) -- With oil prices trading near their highest level in two years, some traders are betting that the price rise could have more room to run.

    A total of 48,000 contracts have traded over the last few days that would profit most if Brent spikes before Christmas, including several large individual trades. They include 14,000 options giving traders the right to buy February Brent at $71/bbl, as well as 22,000 for $85 and 12,000 for $80. They all expire on Dec. 21.

    Oil prices have rallied in recent weeks as OPEC supply cuts help to rebalance an oil market plagued by oversupply. More recently, growing tensions between Saudi Arabia, OPEC’s largest oil producer, and some of its neighbors helped prices break above $60/bbl for the first time since 2015.

    Against that backdrop, the crude options market has generally been looking brighter. The so-called put skew, the difference in demand for bullish call options versus bearish put options, has also fallen in recent days. That gauge closed at its least bearish level since late-August on Thursday, bolstering oil’s rosy outlook.

    Price action is clearly confirming the fundamental factors at play. Look at the daily chart below.

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  7. myfxpt

    myfxpt Master Trader

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    Here's the retrace. Let it find support and plan a new buy entry!

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  8. myfxpt

    myfxpt Master Trader

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    Entered a buy order at $56.49 on 21st November 2017. This may prove to be a short-term rally that will find resistance at the $57.50 - $58.00 level. Hence my take-profit at $57.50. If price advances beyond resistance, I will again look at going long.

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  9. myfxpt

    myfxpt Master Trader

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    Closed buy order for $7,858 profit. Await next buy entry if price continues above resistance.

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  10. myfxpt

    myfxpt Master Trader

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    Get ready to enter long on a decisive break above resistance around the $58.00 level.

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  11. myfxpt

    myfxpt Master Trader

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    Decisive break above resistance around the $58 level. Entered a long position.

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  12. myfxpt

    myfxpt Master Trader

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    Entered Brent Crude Oil long.

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