Crude Trades Higher on Supply Outlook; 200 EMA on 4H Chart Seen as Resistance

by on May 13, 2014 6:44 am BST

West Texas Intermediate (WTI) crude traded higher in Tueday’s session, as traders bid up crude on bullish supply speculation. Crude supplies recently hit record levels not seen since 1931 due to the increase production and shale boom. However, traders are speculating that supplies will decline after last week’s one million barrel decline to 396.6 million.

It’s encouraging to see inventories starting to come off, but the broad picture is that stockpiles remain high,” said Ric Spooner, a chief strategist with CMC Markets. Spooner forecasts crude to hit $101.20 per barrel, an .80 cent increase from current levels.

Crude has seen a little run up, but the geopolitical crisis in Unkraine has not had much effect on black gold since peeling away from $105 per barrel. Chinese industrial production will be out early in the Asian session, which has remained stagnant over the last 12-months. Analysts are looking for a tenth-percent gain to 8.9 percent from the previous 8.8 percent gain.

Price action have been rejected from the 200 EMA on the 4H chart, and crude has been mildly range bound over the last few sessions. Currently in a triangle formation, positive crude supply data from the Energy Information Administration (EIA) tomorrow could provide a bullish breakout. Initial resistance to the upside will lay around $101 per barrel, while additional price action resistance will be found at $101.20/25 per barrel.

Support can be seen at $100.40/45 with deeper support at the ascending trend line at $100.00/05. If Chinese industrial figures are lower than expected, a slight pullback to support levels are warranted. However, a disappointing inventories report from the EIA could give crude a larger pullback. If price action breaks through the triangle to the downside look for support at $99.70 and $99.45.

Analysts are expecting a 400K barrel drop in inventories.

4H Chart of QM

4H Chart of QM