Whether or not that is enough to keep the market afloat is a completely different question, but it is worth noting that the Strategic Petroleum Reserve in the United States is at the same levels it was in the late 70s.
- The West Texas Intermediate Crude Oil market has drifted a bit lower on Tuesday as we continue to see a lot of concerns out there about whether or not we are going to see enough global growth to push demand higher.
- At this point, we are likely to continue seeing a lot of negativity, as the $80 level underneath should be psychological support as well as structural support.
- That being said, the market is very unlikely to continue seeing that level hold if we continue to see a lot of concerns about global growth.
The Americans did the extraordinarily stupid thing recently of announcing they were going to start buying oil at $80 a barrel. Whether or not that is enough to keep the market afloat is a completely different question, but it is worth noting that the Strategic Petroleum Reserve in the United States is at the same levels it was in the late 70s. In other words, in a huge push to buy votes, the US government has depleted its oil supply.
The trend is Probably not Going to Change
The market is likely to see more of a “fade the rally” type of situation, with the 50-Day EMA sitting just above the $90 level and shrinking lower. We have already formed the so-called “death cross” that a lot of people pay close attention to for a longer-term signal. However, it’s very unlikely to see the trend change anytime soon, and with Jerome Powell almost certainly going to be very tough during the day on Wednesday with the interest rate hike and of course the statement coming out that could cause some problems.
Ultimately, I think the only thing you can probably count on is a lot of volatility in choppy behavior, perhaps grinding away between the $80 level underneath as support and the $85 level as temporary resistance. I suspect that by the end of the day on Wednesday we will have essentially solved nothing. This is a market that needs a certain amount of global growth to rally, as oil is the lifeblood of most economies. As things stand right now, demand continues to look very light to say the least.