Reasons To Be Cheerful For Oil Bulls

With the OPEC meeting front and center stage, it’s time to consider the daily chart for the WTI futures contract once again as we come to the end of the trading week with the monthly NFP release also ahead. Remember yesterday’s meeting was inconclusive as member states struggle to reach a deal and further details expected today. But before we get to the price action let’s rewind to Wednesday and the weekly oil inventories which once again recorded a big draw in the storage at the Texas Cushing hub, coming in at -6.7mbbls against a forecast of -4.2mbbls making this the sixth straight week we have seen not only a draw but also one which beats the market’s expectations. So a positive boost again.

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Moving to the chart, it is of course yesterday’s price action which grabs the eye for several reasons. First, the widespread up candle propelled crude oil away from the short-term congestion in the $73.50 per barrel area closing the session at $75.23 per barrel, before opening marginally lower this morning to trade at $75.24 per barrel at the time of writing. Whilst there was a degree of selling and no doubt profit-taking on the surge higher as denoted with the wick to the upper body of the candle, nevertheless, it is not indicative of any inherent weakness. Second, note the volume associated with yesterday’s price action. It is the highest on the chart confirming not only the validity of the move but also by association this is a genuine break away from the congestion phase and not a fake-out. Finally, and in addition, the price has now moved into a low volume region on the VPOC histogram and therefore as a result will require much less effort in terms of volume to move higher and through the $76 per barrel region in due course. So, many reasons to be cheerful for oil bulls as we come to the end of the week, and whilst there will be intraday volatility on any OPEC agreements, the die was cast yesterday with the longer-term bullish trend remaining intact.

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