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Oils’ earnings week is here – so is volatility

Big oil companies are in an earnings week as China opens the sky for air traveling after Zero-Covid policy restrictions.

The earnings week 

The earnings season is here and stock markets reflect current numbers against the estimation, into the price of specific stocks. Commodities are affected as well. Primarily because of producers and sellers of commodities that are enlisted on the stock exchange. Crude oil as one of the most watched commodities in the world is not an exemption. 

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Big oil companies have a very important earnings week. Exxon Mobil Corp., Chevron Corp., and TotalEnergies SE report this week. Moreover, Shell Plc and BP Plc (British Petroleum) in early May. Expectations are lower in comparison with the last year when earnings skyrocketed. The overall estimation of Big Oil companies is around $36 billion. The Q1 from 2022 was above $60 billion. Thanks to the softening of crude oil the estimation is approximately 40% lower than the previous year. 

Open skies above China

China belongs to the countries with the highest demand for black gold such as crude oil. Therefore the state of the economy in the country became one of the biggest fundaments for crude oil. Higher demand has a positive impact on the price of crude oil. And demand in China has been subdued because of Zero-Covid policy restrictions. But now, the situation is different and China opens the skies for air traveling. 

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That elevated demand for jet fuel, and in the last week demand reached almost 75% of the pre-Covid era. Even the fact, the fuel consumption is higher in the whole world, the pace of air traveling in China continues, so the expectations rise as well. Analysts named the rise of air travel in China one of the biggest drivers of world oil demand. 

Crude found the low 

The development of crude was unpleasant, where black commodity erased -5.84% and ended at $77.74. But low around the level of $75 has been set and tested. The current week tested this level and then elevated it to a $79 price tag. The monthly volume weighted average price shows that crude went above $78.67, which represents 1st standard deviation as the resistance.

The next resistance is much more interesting, where the monthly developing VWAP is at $80.29. More importantly, the highest volume in the month, the POC (Point of Control) is at $80.51. These two strong resistances are close to each other and make an important area to watch. 

30 minutes chart of CL (Crude Oil Futures), Monthly VWAP and Market Profile. Source: Author's analysis

30 minutes chart of CL (Crude Oil Futures), Monthly VWAP, and Market Profile. Source: Author’s analysis

The chart below shows that crude oil is about to test the untraded POC level from the 19th of April, $79.35. The other closest untraded POC level is at $81.99 which correlates with the 1st standard deviation from the chart above, which is at $81.90. 

30 minutes chart of CL, Daily Market profile. Source: Author's analysis

30 minutes chart of CL, Daily Market profile. Source: Author’s analysis

Fundaments to rule the price

This week can be more volatile because of the earnings of big oil companies. Despite this fact, the main point is that OPEC+ cut the production of crude oil, and China woke up from the post-covid era. In other words, production is lower and demand rises. This equation is easy to solve. The bigger picture is important, but for daily, weekly, or monthly trading the volatility is favorable. And the earnings of big oil producers could be one of them. 

Tomas is a professional trader and money manager on foreign exchange market from 2014. His main domain are commodities. Experiences gained due this period are transformed to consul...


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