FxWirePro: Oil continues to struggle; WTI bulls target test of $61 per barrel

To breakout or not,

• Since Mid-February, the price of oil has been consolidating in a tight range; both North American benchmark WTI (57.7-54.5), and global benchmark Brent (67.7-64.2)
• The longer the price consolidates, the sharper would be the breakout. The latest downside breakout failed last week when Brent found bullish support around $64 per barrel area, and WTI around $54.5 area. The price actions formed a hammer candle in the daily chart, handing the controls to the bulls.

Fundamentally speaking,

• Oil price remains trapped between global economic slowdown exerting bearish pressure, and OPEC/N-OPEC supply cuts giving the bulls an edge.
• In addition to that OPEC/N-OPEC supply put is also countered by Donald Trump’s tweeter assault on oil bulls.
• However, the oil market remains in backwardation; cash price is trading at $0.27 per barrel premium for WTI and at $0.17 per barrel for Brent.
• Moreover, the commitment of traders (CoT) report shows that speculators like money managers and hedge funds have been increasing long positions in WTI. Since February, Net speculative positions have increased by more than 60,000 contracts.

Trade idea:

• Maintain long positions in WTI crude with a target of $59.2 and $61 per barrel and stop loss around $54 per barrel. Brent crude is currently trading at $57.2 per barrel.
• However, a failure to clear key resistance around $58 area would lead to sharp sell-off in crude oil.