Rig Shutdown Cannot Stop US Oil Production
Today’s Spotlight Market
Crude Oil futures are teetering above near-term support, as US production continues to rise, flooding the market.? Oil prices have also been under pressure due to a rising US Dollar.? The US Dollar Index? has actually consolidated around the 100.00 level, which can be seen as a significant level.? If the index is able to convincingly break through this level, Crude Oil could find itself under further pressure.? In Germany, the popular opinion against Greece staying in the Euro currency has been increasing.? More than half of Germans believe it may be time for Greece to leave the currency, which could eventually pressure politicians to echo similar statements.??? ?
Fundamentals
US production of Crude Oil continues to climb, despite rigs being shut down at a feverish pace in recent months.? The number of active Oil rigs had climbed to 1,609 in October, when the rig count peaked.? The number of active rigs has dropped by over 46% to 866 to end last week.? Despite this decrease in rig counts, Oil production has increase from 9.0 to 9.4 million barrels a day.? The biggest challenge facing the industry may be where to store the excess Oil.? Cushing, OK, home of the NYMEX delivery point, is currently at 61% of total capacity and climbing.? US economic indicators are pointing higher, but it will take some time to work down excess supplies.? The increasing likelihood that the Federal Reserve will soon raise interest rates, coupled with economic challenges facing Europe, China and developing nations, points to the possibility of a higher US Dollar Index, which could pressure prices.
Technical Notes? – View Today’s Chart
Turning to the chart, we see the May Crude Oil contract trading near the near-term support level around 44.55.? Failure to hold this support level could result in prices testing the 40 level.? The RSI indicator is at oversold levels, which could be supportive of prices in the near-term.? For prices to capture some positive momentum, Crude Oil would likely have to break out above the 53.20 level.
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