From what have seen so far, I do believe that there is a price floor for oil, or at least, the upside for oil is greater than the downside. Saudi and Russia can scale back their product to control prices, but they can’t increase their production as they are at almost max capacity. Generally though, nothing much has changed. As with last week, seemingly unrelated factors can move the oil market, such as hurricane Florence and the oil inventory drawdown.

Forecasting Checklist

• Oil industry news
  • Political Plays?
    • The Saudis seem to want to keep Brent at the $70 to $80 range. Link 2.
      • But it is assumed that after the Nov US election, and the Iran sanctions, Saudi can do what it wants with the prices.
    • US is still selling their reserves to keep prices down.
  • Level of uncertainty?
    • Still pretty high now as there is no conclusion to the trade wars, Iran sanctions and repeated oil disruptions.
  • Upcoming events/meetings?
    • US Midterm elections: 6 Nov 2018
    • Hard deadline on Iran sanctions: 4 Nov 2018
  • Oil discoveries or disruptions?
    • The hurricane Florence in US is making traders bid up the price even though the actual US oil production is not in the areas affected by the storm. Some traders have argued that the storm will hurt oil demand, leading to the higher prices. Still, this seems to be a pretty short-term price spike.^
    • A large drawdown of inventories pushed the prices up. but with winter coming, oil demand will stiffen.
• Check status of economies
  • Oil demand?
    • With the large drawdown of inventories in US, it seems that demand is still strong and healthy.
    • The US-ChinaTrade War is still a big unknown, and the latest tariff from US on China has yet to hit.
• Check other charts for movement
  • USD
    
    • On a general uptrend. v
  • Gold
    • On a general downtrend, though leveling off. v
• Technical analysis
  • Oil seems to be facing a price resistance at the $71 Level
  • TTM_LRC ranges
    • Prices are still in the middle of the distribution curve. But the ranges, both short and long-term, are on an uptrend. ^
• Check Chart discrepancies
  • Expiry of futures and next futures chart
    • Prices for the next futures chart is only slightly lower than the current one. v
  • Gap between WTI and Brent
    • Prices have a difference of about $10, which is relatively wide, or at least wider than usual. ^
      • I’d expect this to mean that WTI will go upwards as it is at a discount to Brent as USA finds new buyers for their oil

The Forecast

Considering that prices are in the middle of the probability range, and with high uncertainty in play, I will make an iron condor style prediction. I do not think the prices are moving much one way or the other before Nov 2018. The current price is around $69.44.

• I am 70% confident that the price of WTI oil will not be below $63 and not be above $76 on 19/10/2018