Too Quick To Pick A Bottom?
Today’s Spotlight Market
Crude Oil futures rebounded after comments from OPEC suggested that the price of petroleum could increase due to reduced investment.? With inventory levels at comfortable levels and the Oil cartel, as well as non-OPEC nations, maintaining production, OPEC can do little to try and prop up the price of Crude other than cheerlead.? It is a predicament that can lead to further oversupply issues, as Russia and other non-OPEC nations do not want to curb output in light of their economic hardships.? The death of King Abdullah of Saudi Arabia does add a bit of uncertainty to the nation?s policy going forward.? King Salman has said he will maintain current policy ? at least for the time being.
Fundamentals
Given the 58% decline in prices since June, many traders have been anxious to pick a basement level for Crude Oil prices.? Climbing inventory levels and reluctance of Oil producing nations to curb their production suggests that it may be foolhardy to pick the bottom.? OPEC has been banking on low price levels quashing investment in shale production, as well as other conventional extraction technology.? Also, the cartel hopes that an economic recovery will bring the price of Crude Oil up naturally rather than having to cut production, which could inhibit growth and prolong the pain.? US production may continue to increase, even as companies reduce their investment in shale Oil.? Improved deep sea drilling technology could continue to increase output with existing equipment.? Some offshore rigs are producing double what they were just three years ago. ?
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the March Crude Oil contract lingering around the 45.00-50.00 level in recent sessions.? When the market consolidates like this, the bias tends to lean toward the prior trend, which, in this case, is down.? It is interesting to note that the RSI is slightly diverging from prices and the momentum indicator, which could be a sign that the market could turn higher in the near-term.
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