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Weekly Oil Report
Global equity and commodity markets tumbled last week as the USD posted 6 month highs against the Euro on concerns that the budget deficit problems of European nations may slow the global economy.
Friday’s jobs report said the unemployment rate fell unexpectedly to 9.7 percent, down from the peak of 10.1 percent in October. Yet the hope that we would see positive job growth was erased as the report showed a loss of 20,000 jobs in January.
Crude prices rallied to $78.00 into Wednesday then plunged $ 8 dollars on Thursday and Friday posting 2010 Lows at $69.50 and closing down 2.3 percent on the week at $71.19 a barrel.
Weekly Inventory stats showed Crude stocks rose 2.32 million barrels to 329 million, while gasoline and distillate supplies both dropped as refiner runs fell while Imports increased the most since September gaining 7.1 percent to 8.43 million barrels. Refineries fell to 77.7 percent of capacity, the lowest level since 1989 barring two periods of hurricane disruptions, indicative of overall dismal demand and slow economic growth. Distillate fuel demand has averaged 3.7 million barrels per day over the last four weeks, down by 9.1 percent from the same period last year. Gasoline demand dropped 0.5 percent over the past four weeks to its lowest level since 2004 at 8.64 million barrels per day while total fuel demand for the four-week period averaged 18.8 million barrels per day reflecting a 2 percent drop from a year ago.
Technical Outlook:
Quarterly, Monthly and Weekly chart patterns are overwhelmingly bearish and we expect prices to continue its down trend with an initial test against $70.00 with extended weekly target placed between $68.00 to $67.00 ranges.
Be alert for minor corrections trade ahead of the DOE reports, as a breakout above $ 72.40 or multiple closes above the 200 DMA is bullish on trade in the days ahead. If the Bulls can muster drives up to $75.00, we expect sellers to step back in and trigger sharp sell-offs later in the week to drop trade back down towards $70.00 area.
Downside:
A close below $72.40 is bearish on prices which consist of the broken 8-month uptrend and January’s lows, now February’s breakdown area. Failure to trade above 7240 will 1st play off the 200-day moving average at 71.00 lows then a re-test of the $70.00 to 69.50 2010 lows.
A close below $69.50 is expected to generate the next sweep sell-off targeting $68.50 to 67.50 downside objective. Multiple settlements below $70.00 this week will pave the way for a potential secondary massive selling wave targeting a major monthly double bottom at $65.00 posted in August and September of 2009.
Upside:
Stable price action above the 200-day moving average at $71.00 and the psychological $70.00 benchmark alerts for an upward congestion phase with trends aiming to test the $72.50 to 73.00 Resistance areas. Trade or close above $72.50 alerts for multi-day short covering trade targeting the $74.00 to 75.00 second weekly Resistance. All Longs should be covering against the 6-week downtrend line at $75.00 and looking for $75.00 to fail for big selling opportunities in the days to follow. Settlements above $75.00 are needed to start a sustained recovery phase targeting $78.00 to $ 80.00 range.
