June crude oil futures traded mixed last week as traders had to deal with conflicting signals. Technically, the market is oversold on a short-term basis which gives it a slight upside bias. In addition, a weaker U.S. Dollar is making it cheaper for foreign buyers. Increased demand for higher-yielding assets is also helping to underpin prices.
On the downside, however, is the thought that the pace of U.S. economic recovery is weakening. The recent lower-than-expected jobs data indicated an economy filled with uncertainty as business aren’t hiring at a rate necessary for the Fed to lift its asset-purchasing program. Furthermore, huge supply and low demand are still major issues. The International Energy Agency recently cut its global demand forecast for 2013 for the third consecutive month. The agency also predicted the weakest demand for Europe since the 1980’s.
In addition to the EIA forecast, the Organization for the Petroleum Exporting Countries (OPEC) also cut its global demand estimate for the second time in two months last Wednesday. Last week, U.S. crude oil inventories increased by 0.3 million barrels to hit 388.9 million. These reports are all indicating that the fundamentals are not supporting a global economic recovery and that pressure is likely to remain on crude oil prices.
Taking a look at the weekly June crude oil futures contract chart, we see that the market is straddling a major 50% balance level. Based on the top at $107.86…