Last week, crude oil futures bucked the trend and defied the bearish fundamentals to put them in a position to finish higher for the week. The price action was volatile and with a slight upside bias, but the moves seemed to be caused by counter-intuitive trading at times.
The week started with a strong surge by oil as traders reacted to the weaker-than-expected U.S. Non-Farm Payrolls report from April 3. Expectations that the Fed will be slow to raise interest rates drove the U.S. Dollar lower, which helped boost the dollar-denominated futures contract. Also helping prices to rise was the news that Saudi Arabia raised prices for crude shipments to Asia, as demand from refineries improved.
The rally must have caught many short-sellers by surprise since most of the recent reactions to the movement by the U.S. Dollar had been to the downside. Furthermore, traders seemed to ignore the news from April 3 that Iran and six major powers had hammered out a preliminary nuclear deal. When the deal is finalized, Iran may be able to put more oil on the market, adding to the bearish supply scenario.
Trading conditions turned bullish on Tuesday when it was announced that Saudi oil production rose to 10.3 million barrels a day in March. Once again this news appeared to be bearish on paper because it dealt with increased production. Nonetheless, traders saw it as a bullish development.
By mid-week, the trend had turned up on the daily chart, but another…