Crude Coming Back Up? Not So Fast
Today’s Spotlight Market
Crude Oil futures fell sharply to fall below $50 a barrel after the EIA reported a large build in Oil stockpiles. Oil rallied as much as 20% since Friday on thoughts that the extreme sell-off may have been overdone. While the sell-off has been very large, it has come on solid fundamental reasoning, rather than following where big money is going. The Oil market is extremely saturated, and there is no eye-popping economic data that would suggest global supplies will be worked down in the immediate future.
Fundamentals
According to the US Energy Information Administration, Crude Oil inventories increased by 6.3 million barrels last week. US inventory levels sit at 413.06 million barrels, which is the highest level since the EIA began tabulating days in 1982. More importantly, at least from a domestic perspective, is that Cushing, OK stocks rose by 2.5 million barrels on the week. Considering there is no disruption to transportation from the hub, the build would suggest lower refinery demand on the Gulf Coast. The US Dollar did suffer a minor setback, having its worst day in more than a year, which certainly emboldened the bull camp. The currency is, however, expected to stabilize, which may suggest that Oil may also grind sideways. There seems to be a large contingent of market observers who believe Oil could stabilize in the 50’s for a period of time. There is no shortage of Oil anywhere, but traders have been reluctant to push Crude prices even lower, which very well could set up a grinding market.????? ?
Technical Notes? – View Today’s Chart
Turning to the chart, we see the March Crude Oil contract bouncing back above 49.25, which had been the upper end of the trading range for Oil.? Prices also traded above the 20-day moving average, suggesting that a near-term low may be in place.? The market flirted with the 54.10 near-term resistance before backing off yesterday.? The Oil contract may gain a bit of momentum if prices manage to hold gains above the 50-day moving average.? The RSI indicator bottomed out prior to prices reversing course, which could be a signal of possible medium-term reversal.
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