Technicals:

 

WTI’s 50-day moving average has been gaining on its 200-day average. A cross above it would be a golden cross and a bullish signal that would confirm a new uptrend is underway. A failure to cross, however, would be a bearish signal. Note how much crude oil after a failed crossing attempt last July. This time around, however, the price trend appears more favourable.  Crude oil is coming up off a double bottom and rising RSI momentum confirms increasing accumulation.

 

WTI is currently trading between $42.50 and $45.00 around a Fibonacci cluster and digesting recent gains. A trading correction could take crude back toward $40.00 where the moving averages, a round number and a Fibonacci level could provide technical support.

 

The seasonally favourable period for WTI crude runs through the end of July, so it’s possible we could see a pause or correction and then another advance. Should that occur, next potential resistance tests may appear near $48.10 a Fibonacci level or the $50.00 round number psychological barrier.

 

 

 

Fundamentals:

 

Oil has been recovering based on a number of factors.

 

On the demand side, there is a sense that even if the world economy grows slowly, the dire forecasts for China and other countries that rocked markets at the beginning of the year has faded, and any recovery from here could boost demand.

 

On the supply side, OPEC remains as contentious as ever with Iran still looking to regain lost market share with sanctions now off and other producers trying to maximize production in case of another attempt at capping production.

 

At the same time, US production continues to decline and the US markets appears to be slowly coming back into balance with upward swings in inventories becoming smaller and a few surprise declines creeping in.

 

This week, in addition to the usual inventory reports, a number of monthly economic indicators for China are due over the next week which could give a better idea of demand prospects.

 

News related to the wildfires in Alberta’s oil sands producing region which have forced some production off-line may also spark shorter term swings in the market.

 

 

Client Sentiment

 

The number of clients trading oil currently is split 50-50 between bulls and bears at the moment. In terms of position value, however, the bearish side is clearly dominant in the 70-85% area. This means that bears have taken larger positions and appear to be more committed at the moment. On the other hand, it also means that if crude oil does start to advance, bears could find themselves getting squeezed and potentially forced to cover.