EIA Boosts Oil
Crude Oil prices rebounded yesterday after the EIA showed a surprise decline in inventory levels. The market has seen extremely erratic price action over the past week or so, which is a sign of indecision. Some have seen the sharp drop from recent highs over the $113 level as excessive, which has prevented prices from falling below the $95 level.
At the same time, there is not enough bullish activity to solidly bring the contract back above the $100 level. The bullish enthusiasm over the EIA number could be short-lived, as the overall supply of Crude Oil remains relatively high.
Also, recent economic indicators have given traders little reason to become optimistic about the economic situation in the US. The housing market in the US looks as though we may be in regression, and the overall economy is still on shaky ground. In Europe, the EU has had to tackle mounting debt, which could result in the greenback stabilizing versus the Euro.
Some traders remain optimistic about Oil prices, though, noting that the summer driving season officially kicks off later this month. Also, while supplies of Oil remain high, higher quality low- sulfur Oil remain tight. Given the differing opinions over the Crude Oil market and lack of consensus, price action figures to remain erratic in the near-term.
Turning to the chart, we see the July Crude Oil finding support near the 95.00 level. Prices traded down to this level three times in recent sessions, but were not able to break through. Price action has gravitated toward the 100-day moving average over the past week. Solid closes below the average would suggest that prices are vulnerable to further declines. The crossover of the 20 and 50-day moving averages can be seen as negative for prices. The RSI remains near oversold levels, suggesting near-term price support.
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