February WTI crude oil futures have found short term support

January 12, 2017 9:43AM CST

February WTI crude oil futures have found short term support into the 51.00 handle despite the most recent EIA status report from 1/11/2017 sighting a rise in crude oil inventories by 4.1 million barrels.  Continued talk of OPEC production cuts remains at the forefront of traders’ minds, with most recently Saudi Arabia decreasing its oil exports to Southeast Asia.  The strong dollar trend that has been weighing on the entire commodity sector has found a pullback into the New Year, alleviating the pressure on export figures, and helping to support commodity prices across the board.  WTI crude oil futures have also benefited from a jump in US refinery operations, up 1.6% week over week to 93.6%, and well above the 5 year average (88%).  Increased refinery operations suggest there is still solid demand throughout the crude complex.

From a technical perspective, February WTI crude oil futures have held the short term 51.00 handle, and are now in a mode of testing resistance.  The pullback off the 55.58 highs from December 12, took the market lower in a three wave correction into equal legs 100% Fibonacci extension measurement at 50.69 on January 10 th .  This area of confluence was also supported by a trend line from November 14 th lows to November 29 th lows, and continued through the New Year.  Broken prior resistance into the 51.00 handle from November through December is also now holding as tested support, adding just another rational for the most recent bottom earlier this week.  Upside technical projections can take crude higher towards the 58.00 area, if it’s able to sustain its rally, and push through prior highs at 55.58.

In my opinion, crude oil continues to confirm its longer term reversal and bottoming process that brought the market to decade lows in February of 2016.  The constructive price action from those lows, coupled with continued OPEC production cuts are helping to support US oil prices.  Global uncertainty with the election of President Trump and continued conflict in the Middle East are also helping support commodity prices with crude oil benefiting almost directly.  Traders can look for continued rallies in crude, and supportive price action while above the 51.00 handle.  Although every rally in crude will likely cause more oil rigs to be brought back online, a key test of the 60.00 level is likely, as that is a widely rumored price level for many newer rigs need to cover their cost of production.

Crude Light Daily


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