RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

This week, WTI crude oil futures have continued to prove better bid, and continued their rally higher with front month futures prices reaching a high of $66.66 per barrel.  With the price of WTI crude futures now breaking above resistance, traders should expect tests of prior broken resistance (now as support), and to look for signs of a broader trend reversals before looking for shorting opportunities.  Fundamentally speaking, there is still a perfect storm for crude prices which is causing a short term supply crunch.  With OPEC nations sticking to the cuts in which they agreed upon, and the Keystone Pipeline now over two months of reduced capacity, it’s not surprising to see futures prices for crude oil continue to rise on the back of these fundamentally bullish events.  This week’s EIA Petroleum status report also helped support crude futures, siting a 1.1 million barrel draw to crude inventories.  This is down from last week’s substantially larger 6.9 million barrel draw, however without the main arteries to get crude from the wells to the refineries (pipelines) working at full capacity, continued drawdowns on crude stockpiles is expected.

While the fundamental picture looks bleak for the bears, as crude consumption remains strong, and inventories are being draw down and need replenishing, the technical picture is getting over bought into technical long target inflection zones (an area where longs might take profit).  I personally see this event as more profit taking from the bulls, than a reason to be a net seller and try to pick a top.  In my prior articles, I discussed the various support levels that were proving the bull’s consensus, and could take us to the 62.00 to 64.000 area for upside bull targets.  Now that the market has cleared through to a new high of 66.66, the 67.00 to 70.20 target area is now in focus.  The market has inevitably proven the bull’s case, and while I am still optimistic about continuation higher, it may be time for a test of broken resistance (old) now as support (new).  The Fibonacci support zone that begins at 59.17 is the first logical area of major support (below the obvious psychological support of the 60.00 handle).  I consider this last leg up in crude oil futures (from June of last year) still underway while above 57.40.  In the very short term, you can expect buyers while above the 63.00 area, and while above 63.00 I expect the market to continue higher to the 70.00 a barrel.

Crude Oil Daily Continuation Chart


Dan Hussey