July crude oil prices grinded lower throughout the overnight and early morning hours and registered a new low for the decline. Prices were down $11.00 from last week’s high into the early morning low, and that sharp drop makes them vulnerable to a near term rebound. The outside market tone continued to grapple with disappointing US Non-Farm Payroll figures and slower growth in China’s service sector seemed to exacerbate global slow down concerns. Brent crude oil fell to a new 16 month low as global oil demand concerns and growing risk aversion sparked further long liquidation. However, global equity and a number of commodity markets have been able to recover from their early morning low, seemingly on the hopes of concerted central bank intervention. The Commitments of Traders Futures and Options report as of May 29th showed non-commercial traders were net long 233,409 contracts, a decrease of 7,196. Non-commercial and nonreportable traders combined held a net long position of 241,271 contracts, down 8,386 on the week. The selling trend of the speculator is seen as a negative near term force. It is also possible that the sharp decline in crude oil prices after the report was conducted probably pushed net spec long positioning closer to their 2011 low. This also leaves the market in an oversold situation. The short term price action in July crude oil appears to be building a short term base, with resistance at $82.50. Confirmation of a move above this level today would be positive and set the stage for a further drive toward $84.10.

Technical Analysis

CRUDE OIL (JUL): Momentum studies are declining, but have fallen to oversold levels. The market’s close below the 9-day moving average is an indication the short-term trend remains negative. The close below the 2nd swing support number puts the market on the defensive. The next downside objective is now at 79.56. With a reading under 20, the 9-day RSI indicates the market is extremely oversold. The next area of resistance is around 85.43 and 88.16, while 1st support hits today at 81.13 and below there at 79.56.

StockMarketNews Research Team