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Today’s Trading Edge: Oil sinks after Libya production set to increase and concerns of a potential shale surge

Posted by WorldWideMarkets . on May 30, 2017 7:57:20 PM

WWM US OIL MAY 30 2017.jpg

Oil prices fell over 1% and back below the $50 level after Libya production came in at 780,000 barrels per day due to a technical issue, but is expected to rise to 800,000 on Tuesday.  Oil has lost its momentum after the 172nd OPEC meeting on Thursday, May 25th showed OPEC and non-OPEC producers agreed to keep output cuts at 1.8 million barrels a day for 9 more months.    

Some analysts are cutting their oil projections on concerns of a surging shale market and concern of the compliance on the production cuts.  Goldman Sachs lowered their oil price target for 2017 to an average of $55.39 a barrel, the prior forecast was $56.79.

Price action on the US oil daily chart shows that in early May key support came from a bullish ABCD pattern.  Point D was confirmed with the 141.4% Fibonacci expansion level of the B to C move.  Price is now tentatively trading around both the 200- and 50-day SMA(s).  If we continue to see bearish momentum, further pressure could target the 46.00 to 47.50 zone.  Major resistance would come from the 100-day SMA, which currently trades at the 50.99 level. 

The trade: Sell US oil at $50.50, with a stop loss at $51.50 and take profit at $47.50 The risk/reward ratio is 1:3

Topics: US Crude oil, West Texas Intermediate crude oil, $OIL

 

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