Oil’s Slick Decline Continues
Today’s Spotlight Market
Crude Oil futures continue to suffer setbacks, falling to a 6-year low due to the supply glut and a stronger US Dollar.? The greenback looked as though it may have been on the verge of suffering a technical setback, but the currency was able to find its footing.? The decision to ease the export ban on Crude Oil to allow limited trading with Mexico did little to support prices.? The negligible impact on domestic prices has some lawmakers considering further easing of the restriction and support for such? a shift has gained a bit of momentum of late.? The law is seen by many as a relic of the 1970?s OPEC Oil embargo and companies are better able to react to changing conditions now than in decades past.
Fundamentals
Mexico has proposed exchanging heavy Crude Oil for 100,000 barrels of the light, sweet variety from the US. It has not been publicly disclosed whether the Mexico will get the full 100,000 barrels it had requested. Private data providers have indicated that the Cushing, OK storage hub saw supplies increase last week. Traders will eye Wednesday?s EIA inventory report to see if it confirms a Cushing stockpile increase. Several refinery outages, along with increased production from the US and OPEC, may have contributed to the supply glut. Many market observers have indicated that there is a real possibility that Cushing inventory levels could exceed record highs reached in April. In the event that Cushing runs out of storage space, cash market prices could take a hit as producers look to unload supplies. This problem could be exacerbated by the end of the driving season, where refinery use typically drops off. The US Dollar Index has been strong to begin the week, but the index remains technically vulnerable. A decline in the Dollar Index may give Oil bulls a bit of a reprieve, as the Dollar?s strength has been a contributor to Oil?s price slump.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the continuous Crude Oil contract trading below support at the 42.46 level. This is a significant support level for the Crude Oil market, however traders may be a bit cautious as the selling pressure has not been as intense as one would expect after breaking support. The next support level may be found near 40.00 with additional and more significant support found at 33.98. the RSI is giving oversold reading, and momentum is diverging a bit from prices and the RSI, which could be seen as somewhat supportive.
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