Holding Pattern
Today’s Spotlight Market
Crude Oil futures have traded in an extremely tight range over the past several weeks due to the murky outlook on supply and demand and the global economy. The lackluster PMI data from China indicates that manufacturing there is continuing to contract, which would mean factories are not consuming raw materials at previous levels. In the US, the non-farm payroll data did not support the more rosy numbers that ADP and several other private research firms were reporting. While this does handcuff somewhat the Federal Reserve in terms of a rate hike, it also dampens the demand outlook for Crude Oil.
Fundamentals
Economic forces seem to be working against the Crude Oil market, dragging down demand. However, there are some signs that the price slump is finally leading to a slowdown in production. Both the US and OPEC have seen weekly production trending lower. US production has dropped off from the over 9.5 million barrels a day mark to the low 9 millions in recent weeks. Rig counts looked like they were poised to turn things around, bouncing back slightly. This now looks as though it was temporary, as rig counts are dropping once again. Last week, the number of US Oil rigs fell by 26 to 614, which is a decline of 977 rigs from last year. Oil companies have been lobbying hard to get the 40-year export ban on Crude Oil repealed, and it looks as though the idea is picking up some momentum in both houses of Congress. Regardless, it looks as though the slump in commodity prices could last years, according to Goldman Sachs and Citigroup, which may act as headwinds for a possible comeback in Oil prices.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the November Crude Oil contract continuing to trade in a narrow range. Prices have tested minor resistance near the 47.65 level. Prices may find additional resistance near the 49.25 mark. The RSI indicator is currently in neutral territory, but edging toward overbought levels.
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