Shale Production Heading For A Decline
Today’s Spotlight Market
Crude Oil futures are a bit higher this morning, bolstered by the idea that the ECB will commit to quantitative easing. BHP Billiton and Total, who are sizable players in the shale Oil business, are reported to be decreasing their investment in shale, which was also well received by the bull camp.? Prices seem to have stabilized in recent sessions, as neither bulls nor bears have been able to gain the upper hand. Given the large drop in Oil prices since June, bears may be a bit fatigued, while many bulls have been gun-shy after buying failed rallies over the same period.
Fundamentals
BHP Billiton is expected to cut the number of shale Oil rigs it operates by 40% due to the slump in prices.? Nonetheless, the Crude Oil market remains oversupplied and will likely remain oversupplied for the foreseeable future.? Today?s EIA report is expected to show a weekly increase in Crude Oil inventories of 2.5 million barrels.? It was somewhat surprising to see Oil trading over a 1.00 higher this morning ahead of the ECB, as quantitative easing in the Eurozone would likely lead to a stronger US Dollar in the near-term.? Longer-term, an asset-purchasing plan could stimulate economic activity in Europe and could be positive for Oil.? However, this will take time to make an impact on demand.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Crude Oil contract consolidating between the 45 and 50 levels.? Given the preceding downtrend, the bias may be toward a downside breakout from the range.? The RSI has recovered from oversold levels, but not by a wide margin.? The 20-day moving average has been acting as resistance in recent sessions.? The Oil market could gain some momentum if it can take out the average.
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