Who Says History Does Not Repeat Itself!
Today’s Spotlight Market
While Oil prices are testing 6-year lows, we are seeing the Natural Gas market at price levels seen back in the 1990?s, as ample supplies and an unusually warm start of the winter heating season has front-month futures trading well below $2. Thursday?s morning?s weekly release of the Energy Information Administration?s (EIA) weekly Gas storage report showed only 34 billion cubic feet (bcf) of Gas was drawn from storage last week. This was 7 bcf below expectations, and weather forecasts are calling for well above average temperatures for the eastern 2/3rds of the U.S. out to the end of the year. If accurate, it could allow Gas storage levels to remain well above the 5-year average and potentially lead to more than adequate supplies going into spring. ?
Fundamentals
Oil prices are hovering near a critical price level, with a potential test of the 2009 lows in sight as the world remains awash in Crude. As most of us remember, Oil prices fell from the mid-$140?s in 2008 to the low $30?s during the height of the global economic crisis in early 2009. Who would have thought we would be revisiting that major low a mere 6 years later — especially considering Oil was still trading above $100 per barrel as late as July of last year. Since the beginning of 2015, we have seen both WTI and Brent Crude Oil prices down about 35%, with both weak demand and ample supplies accounting for the plunge in prices. While the near-term outlook looks bleak for Oil bulls, we should remember that commodity prices rarely trend in one direction, and at some point there likely will be a catalyst that will halt the current price sell-off. The U.S. Congress has recently brought about legislation to potentially repeal the ban on U.S. Oil exports that has been in place since the early 1970?s. While this legislation still needs the support of President Obama and there is no guarantee that he will approve this legislation, it is just this sort of unexpected ?catalyst? that could eventually trigger a bottom for Oil prices. ?
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Crude Oil, we notice prices attempting a test of the 2009 lows. This sets up two possible scenarios: either a potential double-bottom formation or a move below $30 per barrel, which was the norm back in the early 2000?s. We should remember that Oil prices above $40 were the ?outlier? back in the 1990?s. The 14-week RSI has once again breached oversold levels, and we do see a bullish divergence in the RSI, which could be a signal that a potential short-covering rally may be near. 33.20 is seen as the next major support level for the front-month futures, with resistance found at 50.92.??
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