What is a Golden Cross for Crude Oil?

When it comes to playing the market, investors are armed with a host of strategies. The "golden cross" is one of the most telling indicators, derived when security's short-term moving average breaks above its long-term moving average or resistance level.

It doesn't happen often, but when it does the markets buzz. As long-term indicators carry more weight, a golden cross scenario suggests that a bull market could be on the horizon. This is usually reinforced by high trading volumes which means crude stocks could be about to boom.

Market gears up for "bullish momentum"

Earlier this month West Texas Intermediate crude oil posted a "golden cross" which saw its 50 day moving average cross over its 200 day moving average. Bill Baruch, president of Blue Line Futures asserts that this type of activity indicates that a strong bullish momentum is about to unfold, which could lead to further gains for crude oil.

The statistics speak for themselves, with crude recently trading at levels that haven't been seen since July 2015. Adding to the bullish outlook is a strong backwardation trend. Developed to analyse futures contracts, the market condition occurs when future prices trade below current spot prices. This indicates a tightening in the supply, with crude oil currently in backwardation until 2022.

US oil exports hit alltime high

Brent crude is also trading at a US$5 premium to WTI. This is encouraging the US to export crude oil at an all-time high. In fact, in early November US crude oil exports hit a huge 2.133 million barrels per day and surpassed 2 million for the first time. Ultimately, all three of these fundamental and technical indicators should work together to bring crude oil up to US$59 a barrel.

Other factors at play include predictions that OPEC will likely extend its production cut until the end of 2018. A meeting is scheduled in Vienna on November 30, which could also help push up the price of crude.

The market may be stabilising, but producers are still continually searching for new ways to minimise costs and maximise returns. For a closer look at the latest technology don't miss 'Selective Ionisation and Affordable High Resolution Mass Spectrometry.' It spotlights the latest HRMS instrumentation and ionisation techniques that are being used to revolutionise molecular characterisation in the petroleum and petrochemical industries.