Oil Prices Retreat As Inventories Increase For Eight Consecutive Weeks
Today’s Spotlight Market
U.S. Crude inventories continue to rise with the Energy Information Administration (EIA) reporting that U.S. Oil inventories rose by a larger than expected 6.180 million barrels last week. This was the eight consecutive week of Oil inventory increases according to the EIA, which reflects lower end-user demand from refineries due to seasonal maintenance.
The EIA did report that Crude inventories in Cushing Oklahoma, the delivery point for NYMEX WTI Crude, continue to decline with 1.341 million barrels drawn from storage last week. Normally this would be considered bullish for NYMEX Crude but traders note that Oil supplies from Cushing are not necessarily being consumed, but are instead making their way to storage in the Gulf Coast, where it awaits for refining demand to increase once spring maintenance is complete.
Fundamentals
Front month Crude Oil futures have fallen once again below the psychologically important $100 per barrel price level as U.S. inventories rose for an eighth consecutive week. March is traditionally a slow month for U.S. Crude demand, as refining operations are taken off-line for maintenance, just prior to the start of production of specialty ?summer blends? of gasoline required by the EPA.
Oil prices have come under some pressure on concerns that the Chinese economy will experience slower growth this year, which could help to slow the growth rate for global oil demand this year. This theory is in contrast to the recent oil demand forecast from the Organization of Petroleum Exporting Countries (OPEC). In its monthly market report, OPEC raised its estimate for global Oil demand by 1.14 million barrels per day as the cartel expects Oil consumption to increases in North America and Europe. However, OPEC does note that the rate of Oil demand growth will depend on the strength of emerging market economies.
While Oil prices have turned weak across various grades, the global benchmark Brent Crude has widened it?s premium to the U.S. benchmark West Texas Intermediate (WTI) Crude the past several sessions, as traders are beginning to price a ?risk premium? in Brent due to potential European sanctions against Russia for its involvement in Ukraine.? With the speculative long position in Crude Oil at extreme levels Oil prices may be vulnerable to a further price correction until U.S. inventories begin to decline or global economic growth prospects, especially in emerging markets begins to improve. ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for April Crude Oil, we notice prices topping out just above the $105 per barrel price level, which has cumulated in a nearly $7 per barrel price decline the past week. Prices have fallen below the 20-day moving average (MA) but remain above the 200-day MA which is currently hovering just above $97 per barrel. We also note that prices have reached the 50% Fibonacci retracement level calculated from the January lows near $91.50 to the recent highs just above $105. The 14-day RSI has turned weak but has not yet reached oversold levels with a current reading of 42.24. Support is seen at 97.05, with resistance found at 101.80.???
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