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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Bullish Case For Oil Building

Fundamental Analysis

(Click Image To Enlarge)

November Crude Oil futures opened the week higher and never looked back. This week’s rally was triggered by a technical chart pattern and fueled by a number of fundamental events.

The conditions for the rally started to build on Friday, October 2. On that day, data was released showing a weekly drop in the number of active U.S. drilling rigs to their lowest level in more than 5 years.

Oil was drifting lower into the release of the rig data from Baker Hughes Inc. A weaker-than-expected U.S. Non-Farm Payrolls report early Friday was the catalyst behind the weakness since it signaled the potential for weaker energy demand, pushing prices lower.

According to Baker Hughes, the active rig count fell by 26 to 614 as of October 2. The total active rig count, which includes natural gas, fell 29 rigs to 809. With the lowest overall rig count since 2002, traders described the “big drop” as “definitely bullish.”

Some energy economists went as far as saying that the low rig count is an indicator of limited capital for drilling this quarter. Another potentially bullish occurrence.

The weaker-than-expected U.S. jobs report was perceived as bearish to oil prices initially. This was because it could lead to a drop in incremental demand growth, leaving the market with flat-demand into mid-2016. However, losses were limited because the U.S. Dollar dropped on the news,…

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