West Texas Intermediate

Earlier this month, we noted that April has historically been the most bullish month for West Texas Intermediate (WTI) crude oil, with the commodity gaining an average of nearly 5% in the month over the last 15 years (and a stellar 9% on average over the last 5 years).

A potential bull flag is forming on WTI near its 7-month high. Whilst the August lows currently stand in its way, we think a break above $65 is eventually on the cards given the strength of the trend.

Oil prices have been on an absolute tear since bottoming around Christmas: West Texas Intermediate (WTI) has gained more than 50% over the past 15 weeks, with Brent experiencing a 41% rally of its own over the same period.

WTI stands near a 5-month high and, whilst there are near-term signs of exhaustion, market positioning, technicals and seasonality suggest further gains could eventually unfold.

As my colleague Fawad Razaqzada noted earlier today, “it is not a question of whether [OPEC] will decide to cut supplies or not, but by how much.”

For the past month, the US crude oil benchmark, West Texas Intermediate, has been plummeting within a clearly-formed descending line, complete with short, intermittent relief rallies. After extending this sharp plunge down to key support around the $42 handle this week, Thursday saw another attempt at a modest rebound rally, which ultimately sputtered.

USD/CAD took a quick dive early on Monday as the US dollar continued its recent pullback and the energy-linked Canadian dollar was driven higher by surging crude oil prices after Saudi Arabia and Russia agreed to extend oil production cuts. As crude oil rose sharply, a corresponding rise in the Canadian dollar helped push USD/CAD down to major support around the key 1.3600 level before bouncing.

US crude oil, as represented by the West Texas Intermediate benchmark, fell on Monday to retest the key $47-area support level. This major technical support marks the year-to-date lows, which have already been tested twice within the past two weeks.

US crude oil remained pressured on Thursday after a recent rebound from this week’s year-to-date lows. This pressure persisted despite a weaker dollar post-FOMC and a surprise draw in US crude oil inventories last week, the first decline in ten weeks.

The bad news for crude oil began recently after doubts started emerging with regard to a proposed OPEC deal to cut oil production. Partly as a result of these doubts, crude oil prices for the past two weeks have virtually been in a state of free fall. Earlier this week, it was reported that OPEC’s oil output may have reached yet another record high in October, casting further doubts on the potential success of any deal to cut production.

Continued optimism over last week’s reported deal struck by members of the Organization of the Petroleum Exporting Countries (OPEC) at an energy conference in Algeria has boosted crude oil prices sharply. Oil surged even further on Monday after Iranian President Hassan Rouhani reportedly called on non-OPEC producers to contribute to lowering global production and supporting prices.

Crude prices jumped in reaction to the latest weekly US crude stockpiles data but then quickly went into reverse gear, before bouncing back once again. Traders were in no mood to take any chances ahead of the conclusion of talks between the OPEC and non-OPEC members in Algeria, especially given how headline-driven prices have become.

Since Friday, the West Texas Intermediate (WTI) US benchmark for crude oil has been rebounding from a critical price juncture around the $43 level. This rise has been driven primarily by tentative hopes for an agreement among Russia, Saudi Arabia, and potentially other OPEC members to limit oil production in the interest of steadying crude prices. Also helping to boost crude oil in the past few days has been a weaker US dollar, which has been pressured by diminished expectations of a September Fed rate hike due to a string of relatively weak US economic data since late last week.

Crude oil prices continued to fall precipitously on Monday, with the West Texas Intermediate (WTI) benchmark for US crude dropping below $40 per barrel for the first time in more than three months. Monday’s fall extends the sharp downtrend that has been in place since the $51-area highs of June.