WTI Crude Falls 1.84 Percent, Sub-$95/bbl

by on November 2, 2013 3:41 am GMT

The black gold is giving trader’s a black eye as crude drops below $95 per barrel from it’s yearly high of $112.25 exactly two months ago. The ever-increasing stockpiles of West Texas Intermediate crude is causing the longest weekly string of declines since 2012.

Data showed that crude supplies rose for the sixth week.”The supply side has overtaken everything else,” said Phil Flynn, senior market analyst at the Price Futures Group. Crude has been a purely fundamental trade as Syrian-induced premium faded. The rapid deterioration of the eurodollar is also adding fuel to the fire as the euro has been correlated to the risk appetite in traders. The eurodollar is pricing in a potential 25 bps rate cut by the European Central Bank (ECB). Support for the eurodollar pre-ECB benchmark rate decision on Thursday is 1.3414 to 1.3400.”The falling euro is breaking the backs of demand for commodities,” said John Kilduff, a partner at Again Capital LLC.

Production out of Libya was also a concern, but production is up roughly 100k barrels per day to 350-400k, according to the Libyan Oil Ministry head Ibrahim Al Awani. The United States is lowering imports of Nigerian crude, averaging 134k barrels per day. This is the lowest level since February 1985, said the Energy Information Administration (EIA).

The likelihood of crude’s fall stopping soon is limited given the degree and fundamental aspect of the crude trade. Stockpiles are nearing 400 million barrels, and refineries are working at below summertime levels. Throughout crude’s fall, targets have been hit swiftly. Since crude’s ranging between $103-103.50, targets of $100 and $96.77 were hit. The current target of $94.15 is very close with crude’s close on Friday at $94.60.

The daily chart shows the next potential area of opportunity at $92.54 per barrel. The RSI is oversold at 26, but the momentum is so great. Both the ADX and -DMI are trending above 33 (a reading of 20 is considered strong). The bearish sentiment of the commodities space is also an important issue to consider. Price action support will be in the mid-$92 area, while a small retraction to $95.25 to $95.50 is possible, but upside is limited.

1D Chart of QM

1D Chart of QM