FOMC Turning The Presses Back On?
??? Fundamentals
Crude Oil futures continue to trade in a relatively tight range, as opposing market forces play tug-of-war. On one hand, the physical market remains well supplied, as evidenced by yesterday’s inventory data, and OPEC has not changed their official output targets. Also, there are economic doubts, which have been amplified by the Fiscal Cliff talks.
On the other hand, the US economy has performed relatively well in the face of adversity. The Federal Open Market Committee (“FOMC”), has pledged to keep interest rates near zero until the unemployment rate hits 6.5%. Given the lackluster job creation rate, it may be some time before unemployment reaches that target.
The International Energy Administration (“IEA”) raised its forecast for Oil consumption during the last three months of this year by 435,000 barrels a day to 90.5 million barrels a day.
The IEA also raised its forecast for 2013, forecasting daily goal demand to remain at the 90.5 million barrel a day pace, which is 865,000 barrels a day more than 2012, and 110,000 barrels more than their prior forecast.
??? Technical Notes
Turning to the chart, we see the January Crude Oil contract bouncing off the 85.00 level once again. Prices have been trapped in the 85-90 range for the past two months. Until a breakout is confirmed, it is difficult to judge where the market will move over the longer-term.
The oscillators offer an equally murky picture, as the RSI and momentum indicators are sitting at neutral levels. The chart suggests some technical traders may look for the market to remain in range-bound trading unless an upside breakout above 90 or a downside breakout below 85 is confirmed.
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