We’ve been looking for additional confirmation of a turn higher in the crude oil market. And we got it!
This includes a bullish turn date in our E-Wave cycle forecast, which tells me the recent weakness in oil is over and the next directional move is higher. Take a look:
As you can see from the E-Wave cycle forecast chart, oil is expected to rally into the third week of August. This comes before a corrective setback that is followed by another drive higher into the fourth-quarter.
But that’s not all.
The oil market also sports a supportive fundamental backdrop that lends additional confidence to the bullish bias.
This comes in the wake of yesterday’s meeting between OPEC and non-OPEC oil producers, which led to stricter monitoring conditions — including closer surveillance of oil exports. Additionally, OPEC officials expressed confidence that global oil inventories were coming back into balance, aided by improvement in second-half 2017 demand.
Another supportive feature came with Saudi Arabia leading by example with their decision to limit oil exports next month by nearly 1 million barrels below year-ago levels. There was also a commitment from Nigeria to adjust oil production.
In the meantime, the oil market is also beginning to warm up to the ideas that U.S. shale oil production could be leveling off. This comes after last week’s Baker Hughes rig count figures showed the second weekly decline in four weeks.
What about demand?
Crude oil imports into China are on the rebound and expected to increase by double digit percentages in 2018, according to a Sinopec Group executive.
In the U.S., the four-week average of total petroleum demand stands at 21.2 million barrels per day, which is up 2.1% compared to year-ago levels.
Bottom line: Fundamental factors as well as our E-Wave cycle forecast are pointing to higher oil prices ahead.
Here’s what we recommend:
Using another 2.5% of the funds you have allocated to this service, buy the United States Oil Fund, symbol USO, at $9.70 or better. This order is good-till-canceled. IF and WHEN filled, immediately place a new good-till-canceled protective sell-stop on all of your shares of USO at $7.89.
This addition brings your total allocation in USO to 5%.
Hold all other positions, and stay tuned for new trades coming your way again very soon.
Good investing,
Mike and David
