March ‘17 crude oil futures are unchanged on the day, following this morning’s EIA petroleum status report. For the third week running, the EIA sited a build in crude oil inventories at a 9.5 million barrel increase since last week’s report of an increase of 13.8 million barrels. The large surge in crude oil inventories is either priced into the market already or being ignored entirely, as the price of WTI crude oil futures remains relatively unchanged through these heavy-handed reports. An initial sell-off was sparked by the reported API inventories last week, but those losses were quickly pared by the market and almost completely unchanged after today's report.
From a technical perspective, and at the risk of sounding like a broken record, March crude oil futures remain in a tight trading range. Last week’s low of 51.22 remains a key line in the sand for bulls, and marks the 6th test of the 52.00 to 51.00 supportive price band I have pointed out over the last several futures cast articles. While price continues to consolidate above this pivotal area, we can expect continued pressure from bulls to test the 54.00 handle resistance and the cluster of prior highs the market has been building below. If the price of the March ’17 crude oil futures can break below the 51.00 area, the next supportive inflection zone comes in at 49.80 to 48.60. Watch for continued compression from and or the break of the downward sloping trend line against the highs of this range. This trend line has acted as solid resistance over the last couple weeks, and the break-of-which may signal for a more sustained upside move.
In my opinion, we can continue to expect a range bound market and consolidation above the supportive price band but below the downward sloping trend line. This has been a particularly tough market to trade on an intra-day basis, with virtually no trend to be able to grab onto. With the lack of response in price action to what has quickly become substantial builds in crude oil inventories, I cannot help but feel this is the calm before a storm. I am expecting this consolidation to result like a spring under pressure… Up or down, the longer crude remains in this range the larger the resulting move should be. Define your risk, pick a side, and get ready for what could be a volatile ride.
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Senior Market Strategist
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.