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May 29, 2017

Trading analysis: Going big long on WTI

Trading analysis: Going big long on WTI

Oil prices were down for 4% on Thursday after OPEC decided to extend production quotas for additional nine month, although it was seemingly unconvincing decision for investors. Massive drop suggests hedge Funds expected more decisive actions from the cartel like extending output cuts for 12 months or slashing more from production, although such concession would be dangerous in light of revival of US shale industry. The primary matter of concern for OPEC and its partners is consistently increasing oil rigs set to play in the US which amount have more than doubled since July of 2016:

While production in the US is in historical peak after a dip concordant with price collapse in 2015-2016:

OPEC probably realizes that new reality will probably require them to accept US as new major player in the oil market and opt for cooperation rather than confrontation where US producers proved to be quite resilient and quickly adapting to changes. In light of this, extension of production cuts and abandoning price wars set a majorly bullish tone on the market which is confirmed by sudden upsurge in CFTC net oil position:

Net positions soared from 329K to 373K indicating a spate of bids on the recovery of oil market.

Based on this short analysis here is my trading call for WTI:

BUY WTI at 50.00 TP 55.00, SL 48.30

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