Three Weeks, Three Builds – Can Anything Stop this Crude Rally? | RJO Futures

February 15, 2017 2:30PM CST

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 6thtest 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.


Crude Light Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.