RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Today’s EIA report saw the first draw in crude oil inventories in 10 weeks, posting a .02 million barrel reduction and ending the streak of rising inventories.  Compared to the prior inventory builds, it’s no surprise that crude has barely reacted to this news, and has only found a meager bounce of its lows.  While crude has confirmed its heading lower in the near term, after breaking down and out of the 56-52 range it found for the first quarter of 2017, it’s important to remember that crude oil has generally been in a range above 40 but below 60 for considerably longer.

In the near term, the technicals point to a pretty simple scenario on the April crude futures.  Now that the market has broken below the 52.00 handle and the supportive price band in that area, we can expect a potential test of this broken support now as resistance.  Before crude prices can even think of testing 52.00 as resistance, the market will need to get back above the 50.00 handle and the 49.35 50% Fibonacci inflection zone that is keeping the short term down trend in action.  Downside should be expected to continue towards 46.00, while below 50.00, as bears have taken control and will attempt to test support to its fullest.

In my opinion, it will be incredibly important to remember the larger range the crude market has been trapped in, and that any moves inside of this range may simply be consolidation on a larger time frame.  From a geopolitical perspective, the great fight over global energy prices continues, with OPEC trying to cut production (and increase prices) while the US is increasing its shale and rig counts, ramping up production, and offsetting the attempts to support this market.  2017 began with a tighter range, that range is now broken, and the larger range bound market is back in play.  At some point, there will be enough capitulation built up for the market to break this range, but until then: its good until it fails.


April Crude Light 240 min Chart


Dan Hussey