RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

With April ’17 crude oil futures moving to the front, not much else has changed for oil market (price action) since the start of 2017.  The range in crude oil futures, between 52.00 handle and the 55.00 handle, is likely reaching a boiling point.  For the fourth consecutive report, the EIA reported a build in inventories of 563k barrels, albeit tiny when compared to the +10 million barrel builds the market saw in recent past.  The reaction from April crude was also tiny at .50, when compared to the previous reports, which previously were met with declines in the price of crude of well over $1.00 (and as high $3.00).  Needless-to-say, the selloffs post these reports have all been faded, and crude has continued to test its range highs with little regard for fundamental opinions.

From a technical perspective, let the broken record spin!  April crude, while it looks prime to break out of its range… is still in a range.  Caught below the 55.00 handle resistance form prior highs, and above the 52.00 handle supportive range, I expect consolidation to continue.  I am cautiously optimistic we will see this range resolve higher, and in the near term, a push to test the continuous contract highs into the 56.76 area may be early confirmation of the bulls taking over.  The price of crude has now broken above trend line resistance, which was pointed out in last week’s article, and this is yet another indication crude may be better bid in the near term.  After this break, seeing crude come back down to retest this broken line as support, and hold a 50% Fibonacci support area at the 53.32 leads me to believe we will see a push towards 55.84 in the near term.

In my opinion, traders will need to continue to expect range bound price action and consolidation above the 52.00 supportive price band, but below the 56.76 prior highs.  While the recent price action is constructive to the upside, the fact remains that this market is still in its treacherous range.  If the price of crude does begin to break down, and can close below the 51.60 recent lows in the continuous contract, I expect the next supportive price band into the 50 to 49 handles.  In due time, this range will break, and when it does the weeks of building positions (and stops above and below the range) should produce a solid move (one way or the other). Define your risk, pick a side, and get ready for what could be a volatile ride.


Crude Light Daily Chart

Dan Hussey