Supply vs. Demand
FXCM's US Oil CFD has declined to $68 and its UKOil CFD is trading at $74. The International Energy Agency said yesterday that demand has remained slack with oil supply accumulating in storage tanks. There is also a fear that the banking sector's woes will impact negatively on the global economy. Global inventories have swelled by 52.9 million barrels in January. This implies that there is an excess supply of almost two million barrels per day. Russia is to decrease production by 500,000 bpd from this month in response to sanctions. This may balance market forces.
USOil Technical Analysis
USOil's daily chart is trading in its bearish channel between the lower blue and red bands. The red Bollinger bands are moving in opposite directions as volatility has increased. The longer it maintains this channel the more pressure will be applied to the USOil price.
The hourly chart on the right indicates headwinds as there is resistance at the central pivot P and the R1 pivot, which overlaps with price resistance (green box).
The central pivot is the more immediate issue. If the hourly stochastic rolls over and heads back towards 20, price is likely to react off of this level. However, if the stochastic makes its way to 80 and holds, the R1 pivot will become the next concern.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.