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Another 2015 Like Meltdown In Crude Oil Rising Supply Raises Concerns -

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    • Another 2015 Like Meltdown In Crude Oil Rising Supply Raises Concerns
Jul, 25th 11:18

Oil prices hovered at the lowest level in two months on Monday as investors worried that the global glut would weigh on markets.

According to data released by Baker Hughes on Friday, rigs drilling for oil in the U.S. rose by 14 to 371 – the longest run of weekly gains since August 2015. The steady growth in the number of active oil rigs dirilling for oil in the U.S. is spurring concerns of more shale output in the future. The rise was mostly supported by the recent price rally as prices went from around $25 a barrel in February to the current level of 44.27.

The Energy Information Administration has stated that rigs have been put back to work in seven of the past eight weeks. U.S. crude production has halted its slide, and increased for a second week through July 15, raising more fears of a global glut in the market. Money managers added the most shorts in a year on falling West Texas Intermediate prices during the week ended July 19, according to Commodity Futures Trading Commission data.

Goldman Sachs reported last week that the Organization of Petroleum Exporting Countries (OPEC) boosted its production by 0.7% to 32.9 million barrels a day in June. Russian output will climb by 590,000 barrels a day over the next three years to exceed the former Soviet record.

According to an AFP report, Nigerian police have arrested a key militant responsible for attacks on oil infrastructure. This adds further potential of increasing supplies to the market, as supply disruptions around the world are likely to come to an end.

In addition to weekly oil inventories data from the U.S. energy department on Wednesday, investors this week will be keeping a close eye on two major central banks — the Bank of Japan and the U.S Federal Reserve for their decisions on interest rates and monetary policy, and their outlook on the economic prospects of their their respective countries.


Fig. WTI D1 Technical Chart

WTI has plunged continuously for a week under pressure from the two moving averages- both the long-term and short-term. RSI is hovering around level 38, and is anticipated to continue heading lower along with the price, to push the commodity into oversold territory. ADX is at 23.40, combined with –DI beginning to turn down, suggesting that the bearish trend has been getting weaker. The trend indicator is urging short positions. The support level of 42.51 is expected to be tested soon.

Trade suggestion

Buy Digital Put Options from 43.83 to 42.51 valid until 19:00 July 25, 2016

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