As my colleague Matt had written last week, Saudi Aramco began its road show to begin showcasing the state owned giant to investors yesterday. They expected to wrap it up before the OPEC meeting on December 4th in Vienna. But according to Bakr, which covers OPEC and Middle East Oil policy for the Energy Intelligence, multiple international investors have reportedly told Saudi Aramco that they would limit participation in the IPO if it is valued of USD 1.5 Trillion. In addition, comments out of China that a trade deal, or changes to the trade deal, may not happen before the end of President Trump’s presidency are also affecting the oil market.
Yesterday on the Monday morning reopen, the Light Crude Futures gapped higher, only to quickly fill the gap and trade lower on the day. Price moved lower from a high of 58.17, broke lower through the 200-day moving average at 57.37 and is currently down nearly 2.25% on the day, putting in a low so far of 55.62.
Source: Tradingview, NYMEX, FOREX.com
After gapping higher in mid-September because of the attacks on the Saudi Armaco facilities, price began to trade lower and retest the band of support of lows near 51.20. Crude then bounced in a rising channel to the 50% retracement level from the price after the previously mentioned gap highs to the October 3rd lows near 57.50. Price is currently sitting at the bottom trendline of the rising channel at 56.05. As a result of the bounce, Crude has put in a flag formation and if price breaks lower below the bottom trendline, it will have broken the flag formation. The target for a flag is the length of the flagpole added to the breakout price, which in this case would be near 46.75. If price reaches the target it will be well below the previous support zone of 51.50/51.20. Watch for price to pause if Crude trades down to that level. Horizontal resistance comes in above near 56.57, and above there at today’s highs of 57.19.
Source: Tradingview, NYMEX, FOREX.com
Saudi Aramco has reported just recently that they have almost enough early orders to successfully undertake their IPO, however this not to have phased the price of Crude, as it continues lower (for now). Watch for more comments regarding the IPO, which may give direction to the price of crude. But for now, it appears US-China trade deal fears may be driving the market. In addition, the American Petroleum Institute (API) is set to release their crude oil stock change for the previous week after today’s close. API’s were down 500,000 last week. If there is a large change, this can also move the price.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.