January crude oil futures reached a five-month low this week, however, oversold conditions and technical support points stopped the slide, putting the market in a position to post a potentially bullish weekly closing price reversal bottom. Although the fundamental picture still indicates the presence of supply concerns, the price action seems to be suggesting that the market is stabilizing, making it ripe for a potential short-covering rally.
This week, the market was hit by two bearish oil inventory reports. On Wednesday, the American Petroleum Institute said that U.S. crude inventories rose by 600,000 barrels last week. On Thursday, the U.S. Energy information Administration reported that crude supplies rose more than expected the previous week. Crude oil supply was up 2.6 million barrels for the week-ended November 8. Analyst estimates were looking for supply to rise by 1.8 million barrels.
These reports suggest the potential for further downside action, but the market stopped going down. Although technical traders will cite oversold conditions and chart points for the developing rebound, something else may be helping to put in a bottom and that something may be the rising spread between Brent and crude oil contracts. Currently, this spread stands at $14.93 a barrel, the widest since April 2013.
Brent oil prices were well-supported in recent trading sessions amid growing concerns over a disruption to supplies from Libya and after talks aimed at curbing…