Iran Progress Holds Back Oil Prices
???? Fundamentals
Crude Oil futures have consolidated over the past week, after dropping more than 5 dollars in the two sessions prior. Growing stockpiles of Crude Oil appear to have begun to weigh on prices, however this week’s data actually seems to favor the bull camp.
Yesterday’s EIA data showed Crude Oil stocks rising only 1.1 million barrels last week, versus expectations of a 2.5-million barrel build. Gasoline had a larger drawdown of 1.9 million barrels, versus estimates of a 1-million barrel draw. US fuel consumption over the past 4 weeks was 18.5 million barrels, which is up 2% from the 2012 average.
The positive supply and demand data came at the worst time for the bull camp, as Iran’s rhetoric has turned positive following discussions with the West over its nuclear program. The Iranian government suggested there was a turning point in the talks, and that the West gave a proposal that the Oil producing nation deemed fair. If additional progress is made and a deal is reached, some of the fear premium could be sapped out of Crude Oil prices.
On the economic front, German unemployment has fallen in the month of February. Europe’s largest economy returned to positive economic growth after contracting in the last quarter of last year. US durable goods orders rose 1.9%, while home sales rose 4.5%, giving traders hope that the US economy could be turning the corner.
???? Technical Notes
Turning to the chart, we see the April Crude Oil contract trading in a flag-like consolidation pattern after prices dropped sharply from highs. This suggests prices could come down and test the 87.50 mark in the near-term. Recent selling has taken prices below the 20 and 50-day moving averages, and the consolidation channel sits on the 100-day average. Also, it appears that the 20-day average is on the verge of crossing the 50-day average on the downside, which could be seen as negative.
The RSI indicator remains near oversold levels, even after prices consolidated. While prices and the RSI indicator have remained flat in recent sessions, the momentum indicator has continued lower, hinting at additional near-term weakness.
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