Oil shows signs of inability to cope with price levels of over $ 50, what the next step

crude oil technical analysis forecast 

Oil shows signs of inability to cope with price levels of over $ 50, what the next step Choppy trading pattern in WTI crude oil, which has lasted 14 months. As we hit Another peak, the risk/reward favor is a move back down, unless we break out Above $53.
OPEC is struggling to balance the oil market for several reasons. One is compliance. OPEC comprises a disparate group of nations united solely by their geology

A cartel is threatened by total ineffectiveness when faced with a new supplier. 

The ability of shale oil to fill any incremental demand in the market is rendering any cuts by OPEC useless – OPEC simply hands market share to the shale producers.

There is little incentive within OPEC to comply with production cuts when (a) you think your fellow members may be cheating at your expense and (b) you really need to make up on volume

what you are losing on price to balance your fiscal picture, which is the conundrum faced by OPEC’s lead producer, Saudi.

Fracking has changed the landscape of oil production. In the nascent stages of the fracking revolution, 10 years ago, the technology gained popularity amidst a steep rise in oil prices that made fracking techniques as well as marginal plays like oil sands economically viable. 

The subsequent bust, which culminated in the drop to sub-$30 oil in 2016, pushed the industry into financial distress.

The shakeup from the 2014 bust has seen industry costs fall and breakeven prices rise as shale

producers have moved to improve efficiency and profitability over outright production levels.

The improvement in productivity per well and costs has meant that the industry can now compete in the new normal of sub-$50 oil, imperiling attempts by OPEC to put the shale producers out of business. 

The ability of the industry to continue to access finance is critical for its survival. As long as

Banks continue to provide capital to the industry, it can continue to drill. With so much capital

Chasing yield, there is an opportunity for banks and the capital markets to gain from the junk

Bonds and lending to the industry.

Low-interest rates are, in effect, making the endeavor viable – and thus keeping oil prices

Down. Interestingly enough, that result means that low rates are creating deflation in the most

An important commodity in the global supply chain

crude oil pattern 

Moving to green energy:
Shell is considering a multi-billion-dollar investment in green energy. Shell CEO Ben Van
Burden stated that the company has changed its mindset to a “lower forever” oil price
Environment. A lower forever mindset means fewer capital expenditures invested in
Expensive offshore oil projects or projects in remote areas with little infrastructure and far
From refineries. These large conventional oil deposits are what currently move the oil
Production and cash flow needles for Big Oil.
Big Oil’s attraction to green energy is the long project life and cash flow stability which
Comes with it. The average life span of the wind or solar farm is 25 years. Owners of green
Energy projects can sell their power through guaranteed, multi-decade contracts called
Purchase power agreements (PPAs).

The weight of fundamental evidence in favor of further structural headwinds for any oil market tightening due to elastic supply and lack of demand growth

Dollar strength is usually bad for the oil price and commodities generally.

From EIA  - Energy Information Administration

U.S. crude oil production forecast expected to reach record high in 2018

“Based on data from Baker Hughes, 366 of the 915 onshore rigs in the Lower 48 states in June were operating in the Permian region. EIA forecasts that the Permian’s rig count will fall slightly to 345 at the end of 2017 and then grow to 370 by the end of 2018.
In EIA’s latest Short-Term Energy Outlook (STEO), total U.S. crude oil production is forecast to average 9.3 million barrels per day (b/d) in 2017, up 0.5 million b/d from 2016. In 2018, EIA expects crude oil production to reach an average of 9.9 million b/d, which would surpass the previous record of 9.6 million b/d set in 1970. EIA forecasts that most of the growth in U.S. crude oil production through the end of 2018 will come from tight rock formations within the Permian region in Texas and from the Federal Gulf of Mexico.”

Cot Position Map: Positioning is highly extended: swap dealer raised bearish bets on oil for the fifth week in a row to the highest level since December; priming the market for a steep reversal- similar behavior appears in 2013 see the charts

oil position map 

technical analysis update:After the pattern archived: as I mention the last post- the pattern suggests the bullish trend, for the coming trading sessions, pointing that the prices creating a possible bullish pattern that its confirmation wti level situated at 39-40 $, from looking at the charts we can see also the resistance at 42-43 areaThis pattern also suggests some corrections after reaching the target. Breaking down 36.20 followed by 35.10 levels will send the crude oil to cope with 33-34 $look on the white strip - you can see clearly the block on the upper areas - 52-53$ prices

history crude oil 

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