The demand side for the global oil trade rests on the Far East and specifically China. News of a slackening economy and a slowdown in factory orders has helped keep a tenuous cap on oil prices .But there are signs that China will not wallow in the malaise of money, but would work to accelerate growth. This is according to Lou Jiwei, Minister of Finance. He notes increases in electricity consumption, a metric that we believe is the most reliable reading of economic health or dis-ease. These comments were made on the side at the G-20 meeting this week. Moreover, none of the fellow delegates at the meeting thought that China would undergo a hard landing.
News that sent WTI lower early Friday was a break through on Palestinian and Israeli peace negotiations beginning after a three year hiatus. One notable aside, when the announcement was made to the press that both sides had agreed to the negotiations, it was done by Sect. of State, John Kerry standing along instead of the with the participant delegates from each side. In diplomacy when one wants to underscore unity in action, the photo op is usually showing conviviality among the participants. The lack of accompaniment by the entire group demonstrates that this will not be an easy or quickly rewarded process.
Venezuela has formally ended their efforts to reconcile diplomatic relations with the U.S. At issue is the Obama nominee for U.N. ambassador. The Venezuela for their part are incensed that the Ambassador referred to the country as a repressive regime and would contest “the crackdown on civil society.” Since there has been little oil of late that has moved to the U.S. from the South America country we see this as more of a state issue and not an oil problem.
It does appear as if August completed a wave to the upside at the 3.1625 area Friday.
The resulting decline from that level was a little too large a drop to suggest another leg higher without more of a correction.
Therefore August will find resistance at 3.13 to 3.1350. The minor pivot is 3.140.
The key upside pivot is 3.1650 which if punctured by a five minute settle will yield the alternate count’s outlook for 3.18 to 3.1850.
We are a cautious seller of the rally. This will be at 3.1350. The protective stop placed above 3.14.
The issue is refinery glitches that have modified gasoline production. One of the situations will be a long term event. That is for Canada’s East Coast refiners that were importing Bakken crude. Since the train tracks have been destroyed by the accident there a few weeks back, the shipments of crude to the refineries have been spot driven and difficult to obtain.
Nevertheless, European refineries may take up the slack for the New York harbor. This will needs to be seen.
The downside pivot that will confirm an intermediate term top is a daily settle below 3.0780.
Its signal will suggest a drop to 3.00 to 2.99.
The point of elasticity for the price is found at the 3.40 to 3.42 zone. This roughly represents $4.00 per gallon gasoline, which the economy has rebuffed twice earlier.
August’s outlook for a pinnacle to the pattern rests on its ability to withstand a push by the bulls for a daily settle above trend resistance at 3.1450.
Note the overbought condition on the stochastic measure below.