Fundamentals Fuel Bear Market For Crude
Today’s Spotlight Market
The price premium for Brent Crude vs. WTI has fallen of late despite continued tensions in the Middle East. The November spread has fallen below a $7 Brent premium as oil demand from both China and Europe has declined. Brent Crude is considered the benchmark for global Oil prices and its move below $100 per barrel appears to be signaling that concerns of lower global demand are overshadowing the fear of any supply disruptions tied to the continued political conflict in Iraq and Ukraine. While WTI Crude prices, the U.S. benchmark grade, have also been falling, the prospects for stronger economic growth in the U.S. are helping to lower Brent?s price premium.
Fundamentals
Motorists are getting some relief from the ?pain at the pump? as oil prices continue to slump. The latest bearish data came from the International Energy Agency (IEA), which lowered its forecast for global oil demand next year. While global demand for crude is expected to rise by 1.3% in 2015 according to the IEA, they cut the over 160,000 barrels from previous estimates. The bearish news continued when the IEA reported that Oil exports from Saudi Arabia, the largest OPEC oil-exporting nation, were at their lowest levels since 2011. U.S. Gasoline prices at the pump averaged just over $3.14 per gallon according to AAA, which was the lowest average price since late February. The Energy Information Administration (EIA) reported in its weekly energy stock report, that Gasoline inventories increased by 2.38 million barrels last week to stand at 212.4 million barrels. So while both Gasoline and Distillate fuel supplies rose, fuel usage declined by nearly 7% last week. Not even continued tensions in the Middle East seem to be able to support Oil prices of late, which leave little for energy bulls to hold on to as prices appear poised to enter into a bear market, which would be the first since late 2008.
Technical Notes View Today’s Chart
Looking at the daily chart for November WTI crude, we notice the current downtrend began back in July once prices fell below the 20-day moving average (MA). The longer-term trend entered the bear camp back in August once the 200-day MA failed to support prices. The 14-day RSI is weak but remains above oversold levels with a current reading of 35.66. 87.85 is seen as the next major support level for the November futures, with resistance found at 95.07.
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