May crude has found some support above $100 and is in a downward congestion pattern. I feel once the market breaks below $100 we will see extended selling pressure, consuming sell stops and creating a confirmed downward trend. I expect the market to get back to October 2011 levels roughly at $75 before the second week of May. The fundamentals have improved greatly as we are currently at a 12 year high in U.S. oil production.
Demand for crude is not keeping pace with supply. Oil inventories have rose 16 million bbl’s and are now at 4.9% above the 5 year seasonal average. The macro nail in the coffin geopolitically is high oil prices for every country. We saw this in 2008 and during an election season I think it’s highly un-likely that we get anywhere remotely close again. It’s possible that $110 crude oil was the political glass ceiling. Through political arm twisting and the general nature of supply and demand we should continue to see positive supply. Over the past few weeks we haven’t seen any meaning full “Iranian conflict” news hitting the market. That being said I believe the fundamentals are there to drive the market lower.
INVENTORY EXPECTATIONS IS FOR A RISE OF 2 MILLION BBL TO 364.4 MILLION BBL, GAS INVENTORIES TO FALL 1.25 MILLION BBL TO 220.7 AND DISTILLATES TO BE UNCHANGED.
Support -
100.30
99.45 (technical close below this level is positive signal for continued sell off into the high $97’s)
98.58
97.32
Resistance-
102.70
103.28
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Daniel Pavilonis
Senior Commodities Broker
Daniel started his career as a broker with Lind-Waldock in 2007. He is well diversified in the markets with the indexes and currencies amongst his favorites. Daniel can often be found quoted in industry sources, such as Bloomberg, Dow Jones Newswires, WSJ and Futures magazine..... Read More
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