Will Oil Producers Finally Cry ?Uncle??
Today’s Spotlight Market
Crude Oil futures shrugged off a larger than expected storage build last week, adding to the call of some analysts that a near-term bottom may be forming. On Wednesday, the Energy Information Administration (EIA) reported that U.S. Crude Oil inventories rose by nearly 8.4 million barrels the previous week. This was above pre-report estimates of a 3 million barrel increase. However, Oil prices rose following the EIA report, with traders citing a draw in Crude inventories in Cushing, Oklahoma, the delivery point for the NYMEX Crude contract. Not even the equity market sell-off following the statement from the 2-day Federal Open Market Committee meeting could derail the Oil market rally, which could be further evidence that a near-term low for Crude Oil is in place.???? ?
Fundamentals
2016 could be a very interesting year for the Crude Oil market, as prices have rebounded off multi-year lows on reports that OPEC and Russia may be in talks about potential production cuts to help curtail the oversupply of Crude seen globally. This speculation has triggered a bout of short-covering buying by weak Oil bears in a market that appears to have become oversold. Oil prices also may be getting a minor boost from equity prices, which have also rebounded moderately off 2-year lows. Any potential talks with OPEC members and Russia will need support from Saudi Arabia, OPEC?s largest Oil producer. The Saudi?s have resisted production cuts during the steep sell-off in Oil prices, fearing loss of market share. In the U.S., Crude Oil inventories continue to swell, with 8.383 million barrels added to storage last week. U.S. Crude inventories now total 494.9 million barrels, not including Oil storage in the U.S Strategic Petroleum Reserve, which is at an 80-year high. With Iran ready to ?officially? re-enter the global Oil market and Oil production from U.S. shale formations not falling as much as expected, it may be difficult for Oil prices to sustain any serious rally attempt, barring any official announcement that OPEC is serious about curtailing Oil production.?? ?
Technical Notes?? -? View Today’s Chart
Looking at the daily chart for March Crude Oil, we notice prices attempting to form a ?V? bottom. To confirm this technical pattern, we would like to see prices close above the December 14 low of 34.53, ideally on above average trading volume. Prices are currently hovering near the 20-day moving average (MA), although still well below the more significant 100-day MA which is currently near the 41.00 price level. The 14-day RSI has rebounded from oversold levels and has moved to a more neutral reading of 49.23. Support remains at the contract low of 27.56, with resistance seen at 38.29.
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