Oil Bears Decide to Take a Break

Author: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

On October 16th, the oil market remains under pressure from the bears, though the amount of sale has reduced a bit. At the same time, market sentiment is still quite cautious. Brent is trading close to 81.00 USD today with the weekly low at 79.85 USD. WTI costs 71.70 USD.

According to the Commodity Futures Trading Commission, in October global investors are decreasing the net long position in Brent. By October 9th, the amount had fallen up to three-week lows and was equal to 475.5K contracts (-6.4K.). At the same time, the short position hit four-week highs.

On one hand, the USD behavior offers the oil market an opportunity to recover after sales. On the other hand, the oil rally that occurred not long time ago gave a boost to American companies involved in shale oil production: the more expensive the oil, the more profitable the production and the expansion.

In this light, the statistics on the Crude Oil Inventories and the Natural Gas Storage to be published this week may show excellent numbers. Last week, indicators increased significantly, thus allowing “bears” to become more active. One shouldn’t exclude a possibility that the same might happen this week as well.

In the H4 chart of Brent, the price is trading downwards; it has been already corrected to the downside by 38.2%. The graphical analysis indicates after testing the support line of the descending channel, the price is trying to enter the downside projected channel. Taken together, these facts imply that on its way down the instrument may reach the retracements of 50.0% and 61.8% at 78.63 and 76.61 respectively. The resistance line for the current trend is at 83.08.

Featured image courtesy of Shutterstock.

Having majored in both Social Psychology and Economics, I went on to continue my education in post graduate. Later I worked as a team lead of a tech and fundamental analysis lab in the Applied System Analysis Research Institute. This helped me to acquire all necessary skills and experience to become a successful trader and analyst, as well as a portfolio manager in an investment company. I'm a pro in the financial field and the author of articles for various international media. I also hold the position of Chief Analyst at RoboMarkets.