March WTI Crude Oil Futures have pared the majority of the decline since February 8th EIA Petroleum report, which showed a 13.8 million barrel build in inventories. The large increase in crude oil inventories shocked the market, and March oil futures sold off almost $3.00 to lows of 51.22 into that report. The initial sell-off was sparked by the API inventories number, which was released the night before. The confirmation between these two numbers of an approximate build of 14 million barrels was well over last week’s reports, where the EIA saw a build of 6.5 million barrels. The continued increase in stockpiles is likely the main reason behind the stall-out in the rally and forcing bulls to reconsider their long positions in the market.
From a technical perspective, March crude oil futures remain in a trading range. While my technical analysis is starting to sound like a broken record, the fact remains that this market is still making lows above 51.00 and highs below 54.00. I was previously tracking a tightening range of 52.00 to 54.00, and it’s clear, bears are gaining more traction with the recent fundamental news, and have re-widened that range to 51.00 prior lows. The same main technical support, with a price range of 51.07 to 51.77, remains intact and has yet again proven itself in the near term. Resistance still remains above the market into the 54.00 handle, with a cluster of range highs in that area.
In my opinion, we can continue to expect a range bound market at this time. Nothing has really changed from a technical perspective, however the fundamental picture has turned rather dramatically with the recent “extreme” build in inventories. That can be outweighed by increased demand for crude as-well-as oil rigs responding by cutting production, so it will be important to watch rig counts and gasoline refinery numbers in the coming weeks. With that being said, while the March crude oil futures remain above 51.00, even with the recent fundamentals being priced in, crude futures are rather well supported and can continue for a re-test of the 54.00 handle resistance. Below 51.00 will likely see a retracement to test 49.80 (50% retracement of the entire prior rally from 43.23), and a more bearish price scenario taking over.
Mar'17 Crude Light Daily Chart
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Market Strategist II
Dan started his career as an arbitrage clerk in the Euro Dollar pit on the floor of the CME. After graduating from the University of Notre Dame, he leveraged his computer science background and started his trading career developing both automate and discretionary trading systems. Dan has spent the last 5 years trading his own account, concentrating primarily in the currency and grains markets. Most recently he has joined RJO Futures as a Market Strategist.