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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Too Much Oil, Not Enough Cold For The Markets

Crude Oil Outlook

A valiant attempt to consolidate March Crude Oil prices failed this week when the market traded down to a level not seen since April 2009.

The market has been particularly sensitive to recent U.S. economic data including Thursday’s friendly U.S. weekly jobless claims, but when it was all said and done, the short-covering couldn’t overcome the selling pressure especially since this week’s government energy stocks report was so bearish.

The jobs data gave hope to traders who were betting the U.S. economic recovery would gather enough strength to promote demand for oil products. The jobless claims report was not strong enough to overcome the bearish supply data from the weekly U.S. Energy Information Administration (EIA) report which showed that domestic crude stocks had risen by almost 9 million barrels from last week to nearly 407 million. This is the highest level since the government began keeping such records in 1982.

The size of the short positions in the market reflects speculation that traders expect stockpiles to continue to keep building as U.S. production has shown no signs of slowing despite industry layoffs and decisions to curtail future projects.

Currently traders have an added incentive to continue to push prices of nearby futures markets lower because of contango pricing. This occurs when nearby futures contracts are trading higher than the deferred contracts. This gives traders the incentive to…

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