RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

For the fourth week in a row, Wednesdays EIA Petroleum status report estimated stockpiles had declined by 7.2 million barrels, keeping pace with the anticipated summer month demand.  It’s also worth noting, that it’s not just crude stockpiles being depleted, but gasoline inventories are also being drawn (to the tune of 1 million barrels this week).  Refineries are also operating at an estimated 94.3 percent capacity, leaving a little more room to ramp up gasoline production (crude consumption), and likely a signal that the US oil industry is in full swing.

I discussed in my previous articles how breaking below the May 43.76 lows from the continuous contract was a very important level to give way.  The same set of technical indicators that were diving the market price over the last couple weeks, including two Fibonacci measurements, the lows from July of last year, and the channel the market has been holding the last 4 months.  The 44.00 support from equal legs and 50% fibs on the smaller timeframe charts, which I mentioned in last week’s article, is proving supportive and may be signaling the bulls are gaining back the ability to defend their ground.

Resistance for this week is being tested into channel and Fibonacci confluence zone into the 49.00 handle.  There is an equal legs measurement at 48.80, which aligns with channel trend line resistance.  A breakout higher has naturally tested these levels, and this short term line in the sand may keep the market under pressure in the near term.  If the market turns over from this resistance zone, a break down below 45.81, WTI crude futures should find a support level where there is a confluence of Fibonacci support bands (retracements and extensions) between 40.65 and 37.20 (daily continuous chart below).  In the near-term, the prior lows into 44.00 will be the next level of support to watch, followed by the prior lows of 42.05 for the September contract.  The short term trend is up until it fails, but considering the massive draws to inventories, without crude above 50 handle the bulls aren’t out of hot water yet.


Crude Light Daily Continuous Chart

Crude Light Daily Continuous Chart

Dan Hussey