The crude oil market remains firmly locked in its recent range as traders appear reluctant to hold recent long positions going into the weekend, sending crude prices lower by about a dollar. Uncertainty as to what will come out of the Doha production freeze meeting this weekend between OPEC and Non-OPEC oil producing nations has seemingly led many to exit positions as Sunday's meeting has the potential to be monumental.
However, the likelihood of any real action coming out o the session remains low. The most probable result will be that the lead nations tentatively agree to keep production at current levels, with a close eye on non-participating nations' actions as all participants are keen to protect market share.
Iran is at the forefront of this as they have made it clear that they will not entertain any talk of production stalls until they reach pre-sanction levels of 4 million BPD. Currently they are somewhere in the neighborhood of 3.25 million BPD.
Any shock from the meeting would most likely be a bearish one due to a total breakdown in negotiations that could send the Saudis and Russians home with no deal and a re-invigorated price war ahead. There is almost zero chance that any production reduction agreements are made at this meeting, seemingly the only action that could produce a real bullish follow-through.
Inventories for the week past showed an all too familiar pattern with crude oil stocks coming in much larger than analyst predictions while draws in the downstream cracked products continue to show modestly larger than expected draws to estimates. Simply put, the price action continues to be driven by demand-side forces as driving season, coupled with cheap gasoline, is keeping a firm bid in the crude oil complex with little chance, however, of a breakout of the top of the range.
Technical levels in the crude oil contract have shaped up nicely for the week with the resistance of 42.50 remaining intact after being tested only once with a rally to 42.42 before falling back to the current trend line support area at 42.55. A settle below that trend line should indicate a test of the pivot support at 38.25.
Trend line support is forming the low end of the range currently at 36.15. (Keep in mind, these technical levels will have little effect in the event this weekend meeting produces some dramatic, unexpected results).
Natural gas remains firmly in the range discussed earlier in the week. The trade midweek—up to 2.04—was met with sellers pushing the commodity back below 2 dollars as the Midwest and Eastern states emerge from some unseasonably cold weather and into more normal spring conditions. Inventories for the week featured a small -3 BCF that many felt would be a larger draw based on the colder than normal weather.
Previous important technical levels continue to remain in focus with the high barrier of 2.08 still keeping a strong lid on price discovery while support remains at the congested 1.91 area with additional support at 1.834 below.
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