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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Time For Some Optimism

April Crude Oil futures are poised to close higher for the week after posting a strong recovery, following last week’s sell-off. Technically, the picture is clear, but the fundamentals continue to remain cloudy.

Technically, the weekly chart paints the most bullish picture. Firstly, this chart is still finding support because of the closing price reversal bottom at $44.37 from the week-ending January 30. This chart pattern was confirmed when the market traded to $55.05 the following week, but since then crude oil has tested both sides of a retracement zone at $49.71 to $48.45. Trader reaction to this zone is likely to set the tone for the next few weeks. The week is likely to end with an upside bias since the market is trading on the bullish side of this zone.

If traders can build a support base at $48.45 to $49.71, then the greater the possibility of a continuation of the rally becomes. The longer the support base, the more upside potential since it is often said that “the height of the market is determined by the length of the base”.

The weekly chart also indicates there is plenty of room to the upside. Give the break from $99.53 to $44.37, the first upside objective remains $71.95. This is a pretty optimistic target, however, which means bullish traders are going to have to get help from the fundamentals.

A failure at $47.80 and a sustained move under this level could trigger a retest of the main bottom at $44.37. Support under $44.37 is unknown under this level.

Despite another spike in U.S. weekly supplies, crude oil was able to establish a slight upside bias this week. According to the U.S. Energy Information Administration, crude oil inventories rose by 10.3 million barrels for the week-ended February 27. This exceeded analyst forecasts of 3.7 million barrels. Traders called this the biggest build since 2001.

As expected, the market sold-off on the inventory news, but was able to bounce back after a successful test of the technical support zone and on friendly comments from the Middle East. Saudi Arabia said it would increase its selling prices for its Arab Light crude oil for consumers in the U.S, Europe and Asia in April.

Also helping to support the market was an upbeat speech from Saudi Arabia’s Oil Minister Ali al-Naimi. He said in a speech that oil “demand is gradually rising, global economic growth seems more robust and the oil price is stabilizing.”

Demand…




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