Historic WTI: Levels, Ranges, Targets

 

When WTI Crude dropped from June 2008 highs at 133.88, the current 43.17 price traded below monthly averages from 1 to 30 years. The current 43.17 price now trades between the 30 and 31.5 year monthly averges from 44.26 and 42.99. Current prices share representation to the period from 2000 to 2004 when 53.28 highs matched against 19.39 lows finds the mid point at 36.33.

The 31.5 year current mid point is located at 72.61 from 133.88 to 1980’s lows at 16.35. Why highlight 2000 to 2004 is because 19 monthly averages reveal a downtrend just beginning and oversold is not seen until easily middle 30.00’s. A break above at 44.26 may delay the downtrend but because of the lopsided averages, many, many resistance points are built against an uptrend. WTI at 43.17 is fighting against 18 averages from the 30 year to the 1 year. Those averages are located from 44.26 at the 30 year to the highest at the 10 year at 78.13. Speculation of $60 Crude is miles away from current prices. Monthly averages 1 to 31.5 years were viewed to total 19 monthly averages.

Further working against an uptrend is an inverted yield curve, Currently, the 10 to 30 spread trades 0.57 and 10 to 5″s trade 0.39. Matched against the 10 to 2 spread at 0.80 and 1.19 for the 10 year minus 3 month, upside in oil will continue to severely struggle. To understand 1.19, Fed Funds closed at 1.16 everyday since the last June 14th Yellen raise to add another layer of resistance.

The next WTI break is located at 42.99 at the 31.5 year monthly average then next comes 40.15 and 34.09. At 34.09 is vital because a break opens the floodgates to 29.68 and 28.44. Further, middle averages from 5 year to 12 range from 71.22 lows to 78.13 and 95% bounds range from 33.06 to 31.37, 31.28 and 30.54. The low of lows can take WTI to oversold at 29.34 and 26.67.

Inside the 17 to 31.5 year averages responsible for driving WTI prices, range indicators reveal no dramatic or sudden moves lie ahead but rather we’ll see more of the same slow grinds. Overall the WTI price is low but not low enough to skyrocket higher. A 1% higher or lower WTI move only takes WTI to 42.73 and 43.60 to bump against the 30 year average at 44.26. A 2% move takes WTI to 44.03, 3% to 44.46 and 4% to 44.89. A 10% move takes WTI to 47.48 while 20% to 51.80.

The upside is replete against many resistance points from 40’s, 50’s, 60’s and 70’s. The nearest break points are located from 44.26, 45.69, 45.84, 47.12, 47.51. Tough resistance lies at 49.04 and 49.07 then 48.90, 48.73 and 50.98. to see 60.00 WTI again, breaks must be seen at 53.22, 56.46, 54.87 and 63.07 to offer a few of the many points along the way to 60.00.

The further drop to WTI will take a further reduction in the higher 70’s averages. From 2012 to 2015, yearly averages for WTI were located from 97.98 to 93.17. The 2016 yearly average is currently running at 48.66, a significant drop.

Current Rig Count for June 23 is 941 and 933 last week Vs 1 year ago at 421. Canada’s Rig Count at 170 matches against last week ‘at 159 and 76 at 1 year ago. Rig Counts in context, 1st week December 1999, Rig Counts ran from 771 to 815 and monthly average WTI ranged from 12.01 to 26.10 for the 12 month period. In 1998, Rig Counts ran from 621 to 669 and WTI monthly averages ran from 11.00 to 15.00 for the year. In 1986, Rig Counts ran from 851 to 856 while WTI monthly averages for the year ran from 11 to 22. Speculation is more work must be done on Rig Counts rather than accept weekly face value data as a positive or negative sign to future WTI prices.

The EIA reports as a result of December 2015 Export restriction lifts, Exports skyrocketed to 520,000 barrels in 2016 and 1.1 million barrels as the highest monthly average in February 2017. Mexico imports the largest supply of Gasoline, 44% in 2014 Vs 53% in 2016.

Canada remains in 2016 the largest destination for Crude at 300,000 yearly barrels. WTI is light heavy oil vs Canada’s Heavy Sour Western Canada Select, WCS. 44% of Canada’s Oil produced is WCS heavy blends. Yet Canada’s refining capacity is 2 million barrels per day and 40% is WTI refined while the US refining capacity is 18 million barrels per day. While 300,000 yearly barrels travel to Canada, roughly 7.9 million barrels per day import into the US and results in a small net gain for Exports.

WTI spreads over WCS ran from 13.90 in January 2016 to 16.37 in January 2017. The current spread runs the tighest in years at 0.18. In Canadian Dollars, 0.18 runs 13.56 and 16.99 1 year ago and an average price of 15.88. Further WTI export destinations include China, Netherlands, Curacao, UK and Italy.

The question to further Oil supply is Trump’s signature to Executive orders to lift drilling and exploration restrictions.Then comes the OPEC policy questions as King Salman broke succession ranks to appoint his 31 year old son Mohamed Bin Salman as next Crown Prince.
Brian Twomey

 

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