Morning Futures Roundup

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Oil Leak!
 Fundamentals

Crude Oil futures have fallen to nearly 2-month lows, on the back of a very bearish EIA energy stocks report.  On Wednesday, the Energy Information Administration reported that U.S. Crude Oil stocks rose by 2.855 million barrels last week, well above the 1.4 million barrel draw most analysts were expecting. 

However, really bearish figures were seen in the energy products -- Heating Oil and Gasoline -- which both posted sharply higher increases last week.  Ironically, the product builds came despite lower refinery rates, as product imports increased and domestic demand decreased last week.  As we enter the fall refinery maintenance season, we may see Oil inventories increase even further as refinery shutdowns decrease current Oil demand. 

Some analysts believe Oil prices have been inflated, not due to real demand increases but as a "hedge" against a weakening U.S. Dollar.  Like the Currency futures, speculators in the Crude Oil market are holding large net-long positions, as a weak U.S. Dollar is deemed bullish for commodity prices. However, once the speculative position moves to an extreme level, a massive short-covering rally in the U.S. Dollar becomes more likely, as weak currency longs rush for the exits on signs of a change in trend.  The same situation may be occurring in the Crude Oil market, as traders rush to take profits, as there appear to be some technical signals that the Dollar’s decline might be near an end -- at least in the short run. 




Technical Notes

Looking at the daily chart for November Crude Oil, we notice the price decline accelerated once we had a daily close below the key 100-day moving average, which occurred on Wednesday of this week. This could be interpreted by both long and short-term technical traders that the trend has turned bearish. 


CLICK HERE FOR THE FULL-SIZED CHART

The 14-day RSI has also turned weak, with a current reading of 37.77.  The July 13th lows of 61.38 are the next major support point for November Oil, with resistance found at the 100-day moving average, currently near 69.70.

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