Friday, August 7, 2015

Jobs, Supply Reports

As the end of the work week comes closer, oil investors look for a tunnel to duck into to make a quick exit. The first piece of news on the day reports an increase of 215,000 new jobs in the United States. To go with the positive labor numbers, the dollar swelled against foreign currencies as the positive economic news whispered hope of recovery (and interest rate increase). In the end, the jobs report served as a validation for Federal Reserve chairs that spoke earlier in July on the tough position in which the slow recovery had put them. Crude oil, in response, slid upon opening as well as the DJIA which reacted to bearish signals of interest rate increases. At 1:00 p.m. E.S.T., the Energy Information Administration released supply information, and to the further dismay of crude investors, the data showed a slight increase in rig count. Despite a 60%  decrease in utilization data from a year ago, the market still remains oversupplied and over speculated. Further details from the EIA describe new highs around 17 million barrels of refinery inputs as downstream oil services take advantage of cheap oil contracts. Because of this, gasoline supply increase has forced a small decrease in price for the country average which is now at $2.69. As the slump continues, refined petroleum products and their markets will continue to see increases in supplies as the crude glut is passed down on the line. Regardless of what the numbers tell us or where they appear, the upcoming seasonal trend is inevitable. Bearish sentiments dominated summer oil trading even though it is supposed to be a pinnacle of consumption in the market. Instead, the past week alone has witnessed a total loss of 6.4% in the WTI spot price. Technically, prices rode the Bollinger Band floors for the past week refusing to show any momentum but in the negative direction.
from WSJ


A five-day simple moving average shows a slipping negative trend that crosses below the monthly trend (thirty day SMA). The day and week will end today on the bearish supply data, and volume that supports a heavy sell-off in the market. Approval for the Iranian nuclear deal looks secured as President Obama has already claimed he will use veto power to ensure its effects on the political landscape as well as the worldwide supply picture. A weekend brings respite from losses, but when will speculative investors start hardening a long position to prop up demand for securities dipping because of the slump. Every trader has a signal and a lot of traders have similar signals to when they will enter a position and wait for a reversal in the crude oil price. The real question that should be asked is at what price are individual and institutional investors deeming the saddle point of the price slump? Elliot wave analysis might qualify this small extended dip in the summer as the initial wave of selling that will lead to the beginning of wave two, speculative buying that creates an upswing in the spot price due to institutional hedging. How much lower can prices get before downstream services start to hedge themselves against steeper prices?



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