Well Oiled
Today’s Spotlight Market
U.S. Crude inventories rose sharply last week according to both government and private sector reports. The Energy Information Administration (EIA) reported in its weekly energy stocks report that U.S. Crude Oil inventories rose by 7.6 million barrels last week. This was well above analysts forecast of a 2.5 million barrel increase, but in line with the 9.3 million barrel increase reported by the American Petroleum Institute. While Crude inventories rose last week, Oil product inventories fell, with U.S. Gasoline inventories declining by 2.6 million barrels and Distillates inventories falling by just over 1.5 million barrels. ?
Fundamentals
It appeared that Crude Oil prices were poised to form a near-term low back in August, as a brief move below $40 per barrel triggered fresh buying interest that help to send the lead month November futures above $50 last week. However, the bullish enthusiasm appears short lived as a larger than anticipated inventory build last week combined with lackluster global demand is keeping the market well below last week?s highs.
U.S. Crude production has not fallen as much as many analysts expected given cash prices are down by more than 50% the past year. The Energy Information Administration pegged U.S. Oil production at 9.1 million barrels per day, down a scant 0.1% the past week. Globally, traders see the potential return of Iranian crude to the world market as a barrier to a significant rally in Oil prices, especially in a market that is currently well supplied with Crude and economic headwinds, especially in China, weighing on demand.
Market Technicians note that the recent rally in Crude Oil tended to correspond to weakness in the U.S. Dollar. While the Greenback is still trading near multi-year highs, we have seen some price retracement the past several weeks, which is generally viewed as supportive for commodity prices. If we look at weekly continuation charts for Oil, it does appear that we may ultimately be in a ?range bound? market with strong support seen near $40 and solid resistance near $60. This price boundary may indeed hold as we move into the New Year, barring any unforeseen supply disruptions or a significant weakening in the U.S. Dollar.????? ?
Technical Notes – View Today’s Chart
Looking at the daily continuation for Crude Oil futures we notice that despite the price swings, the market has generally stayed within a $20 price band for most of 2015. Prices are now trading within the 20 and 200-day moving averages and the 14-day RSI has become neutral with a current reading of 50.36. Near-term support is seen at the September 2 low of 43.21, with resistance found at the October 9 high of 50.92.
——————————————————————————————————-
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.