RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

WTI crude oil inventories fell by 3.6 million barrels in the most recent EIA Petroleum Status Report released on 4/26/2017.  This draw on inventories was over 3 times the anticipated consumption, however, June ’17 WTI crude futures clearly were not impressed as they continued to sell off after this news.  With that being said, there is a strong technical setup for a retracement to the latest decline to begin as selling may be overdone in the near-term.  With global oil markets anticipating an extension in OPEC production cuts, it will be important for traders to keep eyes on the news wires for continued consensus from OPEC nations in renewing their supportive measures.  Continued tensions in both the Korean peninsula and the Middle East should also be monitored, as “hot conflicts” are often followed by a rise in oil prices and considered a strong geopolitical event risk.

From a technical perspective, June ’17 crude oil futures have broken below  50% Fibonacci support zone I mentioned in last week article, measured from the March 47.01 lows to April 53.76 highs on the continuous contract.  This inflection zone failed to find buyers at the 50.39 to 49.59 price band, and now is testing the trend line support, drawn against the series lows since last year (see chart below for the trend line in question). This supportive trend line also aligned with the 47.00 handle and a 50% Fibonacci inflection zone, which provided a bounce higher and March lows.  Today, the continuous contract found support at this area, and may be due for a move higher inside the 55.00 to 47.00 range.  With crude futures failing to respect 50% and 61.8% Fibonacci support on both sides of this marker, price action suggests sideways price action within this range for the near future.  The combination of both these trend lines puts crude futures inside a compressing range, and suggests there may be an extended fight over the medium to long term trend still under way.

In my opinion, there is a clear cut opportunity for bulls to defend a key technical area here above the 47.00 handle, and above trend line support at 48.00.  As long as June ’17 crude futures can remain above this area, and the trade can find its way higher, and test trend line resistance drawn against highs.  A failure of support at 48.00, and the supportive trend line, would likely result in a subsequent drop to test the 45.32 level which is a 61.8% fib inflection zone.  There are few markets right now that are taking current geopolitics to such a literal head spin, and the trade in crude is printing it on the chart.  Technicians are at work, and there are key levels that will be respected or not… pick a side, reduce risk, and good luck!

Crude Light 480 min Chart

Crude Light 240 Chart

Dan Hussey