RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

With WTI Crude futures trading down $2.73 in the July contract, it’s become clear the market was not impressed in their initial reaction to the continuation of OPEC production cuts. In an impressive sell off of 5%, the larger range bound dynamics (below 55, but above 40) continue to rein supreme. Even the EIA status report, which estimated a 4.4 million barrel draw on inventories, wasn’t enough to keep WTI crude future prices at their highs. The age old notion of “buy the rumor, sell the news” comes to mind after these two events, and the reactive price action of crude lower is a solid showing of selling interest.

OPEC continues to make headlines, reiterating their rhetoric for continued production cuts which seem to be falling on deaf ears for the market. It’s been months of the same headlines, and while the decreased supply from OPEC certainly helps support crude prices worldwide, the market is being kept suppressed by western supplies. The EIA status report was brushed off and the market seems to have been anticipating a more aggressive plan from OPEC, after both news events have now resulted in the biggest price decline since mid-March.

From a technical perspective, July crude futures are rolling over, and it will be up to bulls to prove support at the 47.88 to 46.91 50% to 61.8% Fibonacci inflection zone. Failure below these levels will keep bears eyeing downside to the 40.00 handle, where a much larger 50% Fibonacci supportive inflection zone lies, drawn from February ’16 lows to February ’17 highs. To add to the 40 handles importance, a 100% equal legs measurement also resides at this level, along with channel support which crude has been ping-ponging between for months now. It’s a range until it fails, but the future favors the bears for the time being, and downside pressure to test support.


Crude Light Daily Continuation Chart

Crude Light Daily Continuation Chart

Dan Hussey