Weekly Crude Oil Outlook
Support for crude oil futures continued to erode last week due to concerns about high supply. Technically, both Brent and West Texas Intermediate (WTI) crude oil are both headed toward bear market territory for the year as they rapidly approach a 20% correction from their 2014 highs.
Supply concerns continue to be triggered by overproduction by the U.S., Russia and Saudi Arabia. Improvements in drilling technology are helping to drive up supply in the U.S. while Russia is most likely selling crude oil to raise cash due to the effects of the European sanctions on the country. Last week, the Saudis surprised traders by cutting prices rather than production.
With supply concerns clearly defined, demand worries may now be entering into the equation. The economic slowdown in Europe and concerns about slowing growth in China are two reasons to believe that global demand will continue to drop, leading to a further increase in supply. On October 8, the U.S. Federal Reserve complicated the supply/demand situation by expressing concerns about the rising U.S. Dollar and a global economic slowdown.
The recent rapid rise by the Greenback is a concern because crude oil is priced in dollars. With the dollar trading at a 4-year high, crude oil has become more expensive to foreign traders. This is encouraging foreigners to delay buy orders or buy only want is needed at this time.
Aggressive sellers such as hedge…