After a bullish outside day reversal Friday and a move to a new two week high during the initial morning hours, June crude oil prices have taken a negative turn. The early weakness comes from a bullish reversal in the USD from a new two-month low, residual concerns over US first-quarter GDP data and data confirming Spain is in a recession. In addition to a soft macroeconomic tone, there are concerns that global oil supply is outpacing demand. This was highlighted in a report from the EIA Friday, indicating that global oil supply exceeded demand by 500,000 barrel per day over the last couple of months. The purpose of the report was to provide the Obama administration ammunition to continue tightening sanctions against Iran. Probably the key factor in the report was that world supply is ample, and unless demand improves, prices are likely to be under pressure. Meanwhile, there is some chatter suggesting that the crude oil market might be garnering a level of support on the hopes of another round of US quantitative easing following weaker than expected first-quarter growth. The Commitments of Traders Futures and Options report as of April 24th showed non-commercial traders were net long 280,546 contracts, a decrease of 7,847. Non-commercial and nonreportable traders combined held a net long position of 301,843 contracts, for a decrease of 5,031 on the week. The selling trend of the speculator is seen as a negative short term force. The price action in the crude oil market has edged back up to $105.50 resistance, helped by a more than 3.1% gain from last Monday’s low to Friday’s high. However, the early morning rejection at $105.00 favors the bear camp early this morning. June crude oil has support at $103.72, then $102.28.
Technical Analysis
CRUDE OIL (JUN): Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The close above the 9-day moving average is a positive short-term indicator for trend. The upside closing price reversal on the daily chart is somewhat bullish. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at 105.82. The next area of resistance is around 105.38 and 105.82, while 1st support hits today at 104.12 and below there at 103.30.
StockMarketNews Research Team