Bulls Crying Over Spilled Oil
Today’s Spotlight Market
The influence of the Organization of Petroleum Exporting Countries, better known as OPEC, is starting to see some of its dominance in the Oil market begin to wane,?as global production from shale formations increases. In its annual world Oil outlook, OPEC expects its Oil output to decline to 28.2 million barrels per day by 2017, which is 1.8 million barrels per day lower than current production totals. While the cartel?s long-range forecast continues to call for higher production through 2040, much of that is dependent on an eventual decline in so called ?tight? Oil production such as that found in the shale formation in the U.S., while global demand for Crude resumes its upward trajectory.???? ?
Fundamentals
That? bullish bias? that seemed embedded in Oil prices as Crude hovered north of $100 per barrel certainly has vanished, as a global glut of Oil combined with just okay demand has triggered what was unthinkable just a few years ago?a bear market. Here in the U.S., Crude Oil inventories stand at just over 380.2 million barrels as of October 31, which is over 20 million barrels above the 5-year average. Surging U.S. Oil production, which is approaching 9 million barrels per day, is helping to curtail U.S. Oil imports, which fell to 6.675 million barrels per day last week according to the Energy Information Administration (EIA). The growth of U.S. Oil production is not expected to diminish anytime soon, with the EIA estimating U.S. Oil production to average 9.5 million barrels per day in 2015, which would be a 44-year high for U.S. production. With WTI Crude prices now trading below $80 per barrel, there has been some talk that current price levels could force some pain for some marginal U.S. shale Oil producers. However, it would probably take Crude prices averaging closer to $60 per barrel to really start to cause some pain for producers.
Technical Notes? -? View Today’s Chart
Looking at the weekly continuation chart for Crude Oil, we notice that the uptrend line drawn from the major lows made back in 2009 has failed, which triggered the start of the current bearish trend for prices. Supporting the bearish argument for Oil prices is the recent crossover of the 20-week moving average (MA) below the 200-week moving average, which is generally viewed by technicians as negative for prices. The 14-week RSI has fallen well into oversold territory, with a current reading of 22.79. With major support seen at 75.00, we may see a period of short-covering buying emerge, which should help to shake-out weak bears for the market.? However, it would be difficult to become bullish on the Crude market until we see a weekly close back above the 200-day MA, which is currently near the 95.00 price area.
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