Friday's Market Minute: Oil Roiled By Fundamental Factors

Energy markets experienced a wild week, with the WTI crude oil futures contract down almost 7% since June 12.

There has been a great deal for oil traders to try to make sense of in recent days: increasing tensions with Iran (especially after reports of a U.S. ship shooting down an Iranian drone in the Strait of Hormuz yesterday), the effects of Hurricane Barry on the Gulf of Mexico, concerns about demand in the face of a bleaker global economic picture, and recent softness in equities. There also was this week’s somewhat puzzling EIA Petroleum Report, which reported a 3.1M barrel draw in inventories and yet still prompted a downward slide – perhaps due to heavier builds in gasoline and distillates.

Despite the mixed bag of fundamental factors for oil, recent price action has seemed more bearish from a technical perspective. WTI crude fell sharply below its 50- & 200-day SMAs after failing at a convincing upward move above the $60 resistance level. Prices are currently hovering near $56, which has often been a point of both support and resistance during the past year. If bulls fail to defend that price level, watch for support near $51 where we saw a double-bottom pattern form last month.

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