Morning Futures Roundup

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Oil's Recent Decline May be Near an End?

   Fundamentals
Crude Oil futures prices remain volatile, with prices beginning to recede from recent highs. We are starting to see Oil's risk premium begin to recede, as hopes that continuing talks with Iran over its nuclear program can avert possible military action in the region. In addition, continued concerns of a slowing Chinese economy and ample supplies of Crude in the U.S. have taken some of the bullish luster out of the market. Brent futures have been especially hard hit, as this global benchmark grade had priced-in a much higher risk premium due to any potential embargo of Iranian Crude. Many traders are now beginning to believe that the embargo, which was to begin on July 1st, may be averted, as Iran now appears to be willing to negotiate with western nations over its nuclear ambitions.

Lower first quarter GDP readings out of China, the world's second largest Oil consumer, are flaming the belief that Asian Oil demand may slow more than previously thought this year. Inter-commodity spreading has become very active, as many traders are unwinding long Brent and short WTI futures due to a potential early start to the reversal of the Seaway pipeline that will allow Oil stored in Cushing, Oklahoma to be sent to the Gulf Coast, helping to elevate the large glut of Oil in the delivery point for NYMEX futures.

Here in the U.S., Oil inventories remain ample, with many traders and analysts looking for a 4th consecutive week of higher inventories when the weekly EIA energy stocks report is released later this morning. The current consensus is for U.S. Oil inventories to have increased by one million barrels last week; if so, we will have seen a nearly 20 million barrel increase during the past four weeks! Many large speculators, who have been holding large net-long positions in Crude Oil, are starting to lighten-up on their long positions, with the most recent Commitment of Traders report showing that large non-commercial traders shed 17,808 net-long positions as of April 10th, dropping the total net-long position to 277,273 contracts. Despite the long liquidation selling, Oil prices remain above psychological support at $100 per barrel. Until we see a close below this price level, it may be difficult for some traders to begin to turn aggressively bearish.

   Technical Notes
Looking at the daily chart for June Crude Oil, we notice what appears to be a rounded-bottom formation, which may potentially be capping the recent price correction. Tuesday's trade sent prices back above the 20-day day moving average for the first time in over two weeks. The 14-day RSI has moved back into neutral territory, with a current reading of 51.08. The low of the recent down move at 101.22 looks to be near-term support for June Oil, with resistance found at the recent high made back March 29th at 106.21.

  
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