Russia Ends Rocket System Ban, Propels Oil
Today’s Spotlight Market
Crude Oil futures were higher in early trading this morning, boosted by an Oil-for-goods swap agreement reportedly signed between Russia and Iran.? Coincidentally, or maybe not, Russian President Vladimir Putin signed a decree ending the country?s self-imposed ban on delivery of the S-300 anti-missile rocket system to Iran.? This comes after world powers, including the US and Russia, came to an interim deal with Iran to scale back the nation?s nuclear program.? This has certainly escalated some traders? fears, although Russia has shot down the idea that it will be going through with the delivery of the system. ?
Fundamentals
Crude Oil futures were also higher on expectations that US Crude Oil production growth will finally slow.? Not only could production fall, but the drop-off in production could be very substantial.? As Crude Oil production kept tumbling, rig counts kept dropping off at a feverish pace.? The number of Oil rigs in use fell to 760 last week, down 53% percent of the October peak.? There can be a delay of half a year to a year between when a well is drilled and when it actually begins to pump Oil.? This makes analyzing just rig counts and capital expenditures by Oil companies a misleading indicator.? That being said, traders banking on production dropping sharply this year could be disappointed.? The full effect of the drop-off in Oil rigs may not be felt until well into 2016.? We could very well continue to see a glut in Oil supplies for the foreseeable future due to drilled out wells continuing to produce Oil and lackluster demand. ?
Technical Notes? -? View Today’s Chart
Turning to the continuous chart, we see the June Crude Oil contract trading above the 54.10 resistance level in early trading.? If the contract is able to maintain the level, it could signal the beginning of a possible breakout from the 42-54 trading range.? Prices are also above the 100-day moving average in early trading.? The RSI indicator is showing Crude Oil near overbought levels, which could provide some headwinds for prices.
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