Crude as an asset class worldwide has been seen as a prime suspect for the last years sell off in Equity markets but now its time to rethink on our view. There has been crucial cold war in Crude production between US, OPEC and Russia since start of 2015 which has resulted in glut in crude market but recent news are sign of something positive coming in the future. Iran has been in focus as they are trying to regain market share in crude production since the sanction lift in last year. But i don’t think there are much worries on production side ahead as OPEC countries including Iran has reached 90% production of the capacity in April as per Bloomberg data source. Total capacity of OPEC is 36657000 barrels/day and they produced 33217000 barrels/day in April. So now there are no chance of any further rise of production. So to sum this up, if they aint any freeze in output in meeting on June 2 then there is not even room to produce more which means output should remain at this level atleast. And most importantly, Russia might join June meeting and there could be a common decision to freeze output which was long awaited support
Even monthly chart of WTI Crude is showing some sign to support Crude output freeze in June. As its always said charts are first to show signs of reversals, this time also it could be true. Monthly charts of WTI as attached are showing that commodity has approached resistance line of the channel and there are full chances to break this downtrend which has been intact since December 2014. To support resistance channel breakout we have other factors too. Blue arrow marked shows positive divergence of Crude price in recent months with RSI giving a strong feel of crude getting back to post $50 mark. But before reaching out crucial levels on upside, we have a strong resistance level at $47. That level has been pivot before a thrust sell-off last year below the same. Secondly, it is exactly the level which will be considered as breakout level of the channel. Thirdly, Volume since recent lows have increased which is confirming that crude prices are bottoming out. And finally its also the SAR resistance mark. So overall my view on Crude is positive from the level above $47 and target on the upside would be next resistance level of $62 which is 200 Monthly average.
Recommendation: Buy WTI Crude above $47 with tgt $62 and stop loss: $41.80