Crude Oil in Triple Whammy

Crude Oil in Triple Whammy

In this first trading session of 2014 a triple whammy of slowing manufacturing expansion in China, news of an imminent increase in Libyan oil production and light trading volumes has weighed heavily on prices of Brent and WTI. Reports that crude output from the El Sharara oilfield in Libya is about to resume within days after protesters agreed to suspend a prolonged strike saw Brent prices skid from above $111 to below $109 in a matter of hours. WTI likewise dropped by a good $2.5 a barrel. Given that many traders are still on holiday, liquidity is running below normal which has therefore helped to exacerbate the sell-off today. Thus if the sellers start taking profit en masse, prices could easily recover sharply. However, for that to happen, traders will want to see some sort of a fundamental stimulus such as another sharp drawdown in crude oil inventories. The EIA publishes its latest stockpiles report tomorrow afternoon.

As a result of the selling, WTI is now hovering just above the 50-day moving average at $96.15 where it may find some support. Beyond that, old resistance at $95.50 could be another bearish target, followed by that long-term bullish trend line which comes in somewhere between $93 and $94. Resistance is seen around $98, followed by $99.