Crude Oil looks slightly bullish in short term; Fundamentals still very negative
Crude oil futures for February delivery are being traded in negative territory around $92.27 / barrel during Asian session on Monday at the time of writing.
Oil is likely to find support at $92.00 and $91.30. On upside, resistance is seen around $93.43 and $94.83, both are important fib levels.
If we look at very short term scenario, this hourly triangle is very important, have a look;
The black gold is bullish in short term as far as it continues trading within this triangle, a breakout which is due in next few hours will determine the medium to long term direction of the commodity.
Swing analysis shows that crude oil is poised for Higher Low as shown in the following chart;
A break below $91.98 would change our short term bias to bearish as we will get Lower Low (LL) in that case.
Iran’s minister for petroleum on Monday hoped that oil prices would remain stable throughout 2014, news agency Reuters reported. He said no dramatic change in crude oil price is expected during current year. “If we see some sharp slump in price, Iran would push OPEC for decrease in production,” the minister was quoted as saying. It is pertinent that Iran has based its budget on $100 / barrel crude oil price for forthcoming fiscal year which commences in late March.
Federal Reserve’s unprecedented stimulus, which was aimed for rescuing the recession-hit economy, played key role in lifting the crude oil price over a course of past few years as it significantly diminished the value of American Dollar. But now in a major policy shift, Fed is mulling over to get rid of its whopping $75 billion asset purchase program as soon as possible because it has achieved the desired results.
The first episode of this policy change was observed in December when the central bank announced tapering in Quantitative Easing (QE) by $10 billion, this consequently triggered a rapid upward surge in the US the Dollar and in turn we saw sharp downfall in commodity prices including Crude Oil.
Crude oil fall was aggravated when minutes of Federal Open Market Committee (FOMC) gave indication that the central bank is mulling over successive tapering in monthly asset purchase program that would ultimately end QE by the end of October this year.
Friday’s shocking non-farm payrolls figure was a sense of little relief for crude oil investors but market shrugged off non-farm payrolls on Monday as the poor data was mainly due to bad weather in the US and not due to macroeconomic factors. Investors are seen to be focused on US jobless rate which slumped to 6.7%, the lowest figure since 2008, which could encourage Fed policy makers to scale back stimulus faster than expected or even consider a first rise in benchmark interest rate earlier than previously thought.
In conclusion I would say that bias is slightly bullish in “Short Term” ahead of FOMC meeting on Jan 29, however fundamentals paint very negative picture for crude oil price throughout the ongoing year.
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