Where Does The Slide End?
Today’s Spotlight Market
The slide in Crude Oil prices had carried over into the new year, sending the price of the front month contract below the $50 a barrel level. Oil may receive some outside support from stronger equity markets if the current rally has some legs. However, the recurring theme for the Oil market is the oversupply situation. The steep decline in prices has not hindered shale production to this point. If it was Saudi Arabia’s intention to torpedo prices to kill off US shale output, their plan has drastically backfired to this point.
Fundamentals
The oversupply in Crude Oil could take months or years to correct itself, according to comments from Suhail bin Mohammed al-Mazrouei , the Oil Minister for the United Arab Emirates. He stated the UAE would not panic and that they have dealt with price fluctuations in the past. Mr. al-Mazrouei also confirmed that the recent price decline will not affect the Emirates’ plan to increase production to 3.5 million barrels a day by 2017. This is speaking out of both sides of his mouth, as he also urged non-OPEC producers to curb their plans to increase output.? In the US, the rise in shale production has led to Oil exports reaching record levels.? US exports were 502,000 barrels a day in November, an increase of 34% over October. This shattered the previous record of 455,000 barrels a day in March 1957. U.S. stockpiles of crude oil, refined fuels and other types of petroleum rose to 1.149 billion barrels in the week ended Jan. 2, according to the EIA. That is the highest level ever in weekly data dating back to 1990. Fundamentally, there is no shortage of Oil traders can point to that would drive the market.
Technical Notes? -? View Today’s Chart
Turning to the chart, we see the February Crude Oil contract continuing to move lower.? Prices have broken the $50 technical and psychological support level.? This can be seen as being a significant setback for Oil prices.? Additional support may be found near 48.50 and 41.50.
————————————————————————————————
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.