Oil Traders Await Inventory Data
Today’s Spotlight Market? – ? Crude Oil futures are lower ahead of supply data, which is expected to show a decline of 1 million barrels. Despite the forecast decline in Oil stocks, traders have been focused on demand, which may disappoint this driving season. Energy traders have been closely monitoring the situation in Russia and Ukraine. Specifically, traders are looking for clarification on the sanctions being levied against Russia. The sanctions are meant to target key segments of the economy, which would include energy. Russian leadership has already talked about blocking the sale of McDonald’s chicken and fruit and grain from the EU. It will be interesting to see if the country’s posturing will have an impact on the export of its bountiful petroleum and Natural Gas supplies.
Fundamentals? – ? Traders are expecting a weekly decline of roughly 1 million barrels of Crude Oil this past week. US Crude Oil inventories, while lower than last year, are above the 5-year average for this time of year. Declines in supplies are the norm during the warm weather months, so a 1 million barrel decrease in inventory levels is not at all unexpected. Typically, inventory levels decline from May to September. Traders, instead of focusing on weekly increases and declines, may want to focus on how quickly inventory levels fall through August. Usually, the July through August time-frame is when petroleum inventories suffer their sharpest declines. Traders will also want to focus on raw economic data, as this will give them a clue as to the demand outlook for Oil. The Russian sanctions could have a negative impact on Oil demand. Russia, despite its posturing, still relies on petroleum exports, so it is doubtful that it will decrease its exports as retaliation to the sanctions.
Technical Notes? – ? View Today’s Chart
Turning to the chart, we see the September Crude Oil contract slowly edging its way back toward the 100 level.? Prices tested this level earlier this month, only to bounce back.? The 200-day moving average can also be viewed as support and is currently sitting at just below the 100 level.? How the price of Crude Oil behaves when it trades at this level could very well set the tone for the market, near-term.? Failure to hold 100 could trigger a wave of selling.? On the other hand, firmness at this mark could result in a test of 104.
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