From a technical perspective, last week was a seminal one for crude oil with the commodity finally breaching the platform of support in the $48 per barrel region, which until then had been holding firm. However, once Thursday’s price action had closed below this key level of accumulation, Friday first confirmed and then reinforced the bearish sentiment for oil once more, closing with a nice solid wide spread down candle on good volume – ( and as suggested in my oil analysis of the 6th March – oil picks up bearish momentum again)
For oil, it was not just a question of if, but when the market would pick up the longer term bearish trend, and the price action of February and early March has merely been an extended pause point, with the upper region of price resistance in the $54.50 per barrel region tested on several occasions, but with each attempt to rally during this period duly failing. The rally of early March even failed to attain this price point, before delivering a pivot high and signalling further weakness which has now arrived. In overnight, and early trading in London on Globex, oil prices have bounced back moving off the lows of the session to currently trade at $46.98 per barrel for the May contract.
Whilst the technical picture is very weak, oil continues to battle on several fronts, not least with the over supply issues with markets awash with crude, and Wednesday’s oil inventories merely confirming this once again with a build of 4.8M, which surprisingly came in on forecast for once. Whilst this was better than the previous week at 10.3M nevertheless, these figures continue to signal supply exceeding demand. In addition, and like many other markets, oil too is being crushed by the weight of the US dollar which continues to rampage its way ever higher, driving other markets lower with the USD index breaking into three figures last week, and you can read my post from last week here: ( USD on the march towards 100)
Finally, with OPEC continuing to maintain its stance of inaction on any change in policy on supply as it continues to take the alternative energy markets head on, the outlook for oil remains heavily bearish and any move through the floor of support now being built in the $44 per barrel region, will then open the way to a move through the psychological $40 per barrel area, at which point, the clamor of objections from member states in OPEC may become too loud to simply ignore any longer.
By Anna Coulling
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