Oil Prices Rebound Following Dovish Fed Statement
Today’s Spotlight Market
Non-commercial traders have become bullish on Crude Oil futures according to the most recent Commitment of Trader?s report. For the reporting period ending March 8, non-commercial traders added just over 43,000 new-net long positions to bring the overall net-long position to 303,758 contracts. Commercial traders are on the other side of the trade with a net-short position of 297,456 contracts. ?
Fundamentals
Crude Oil prices have rebounded nicely from its 2016 lows as a slumping U.S. Dollar, a moderately ?Dovish? Federal Reserve and signs that OPEC may be ready to curb production has made analysts? predictions of Oil below $20 suspect. The lead month May futures are now trading above $40 per barrel and are at their highest price level since early January. The Crude market has seen an upside breakout from a short-term consolidation pattern that had formed the past several trading sessions following the statement released at the conclusion of the March Federal Open Market Committee (FOMC) meeting. The biggest takeaway from the FOMC statement was a lowering of the expectations for interest rates, with the Fed now only expecting 2 interest rate hikes in 2016. The U.S. Dollar posted steep declines following the Fed announcement which sparked a rally in commodity prices, including Crude Oil, as a weaker U.S. Dollar makes commodity prices more attractive to non-Dollar users. On the fundamental side, Oil prices are seeing some support from a smaller than expected storage builds last week.
The Energy Information Administration (EIA) reported that U.S Crude inventories rose by 1.317 million barrels last week, which was about 2 million barrels below average analysts? expectations. In addition, we are still seeing U.S. Oil production trending lower, with U.S. Crude output falling to 9.07 million barrels per day vs. a high of nearly 9.7 million barrels in early spring of last year. Heading into the holiday shortened trading week next week, Oil traders will monitor any statements regarding an April 17 meeting of Oil producers being hosted by Qatar.? Here traders will focus on who will be attending this meeting and attempt to gauge the potential that major Oil exporting nations, both in and out of OPEC, are ready to slow Oil output in hopes of bringing the supply and demand equation in-line and in turn ending the sharp decline in Oil prices we have seen since the summer of 2014.?????? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for May Crude Oil, we notice the market forming what appears to be a rounded bottom technical pattern. This is being tested as we write as prices are testing chart resistance at the 41.60 price level. The market has moved above the 20-day moving average (MA) but still has a way to travel to catch the 200-day MA, which is currently hovering near the 46.15 price level.? The 14-day RSI is strong with a current reading of 64.58.? The August 24 low of 42.50 looks to be the next resistance level for the May futures, with support found at the March 15 low of 37.71.
——————————————————————————————-
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control. Derivatives involve substantial risk and are not appropriate for all investors. Please read the “Disclosure Statement for Futures and Options” prior to investing in futures or options. For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and other risks apply.