Crude Oil Poised to Test 2008 Lows

Posted On 18 Dec 2015

Tag: Oil

Crude oil prices continued to move lower on Friday as warm weather continues to blanket most of the United States east coast. The warmer weather is reducing heating demand, allowing distillate stocks to rise during a period when they normally decline. Distillate stocks are now 9% higher this year than the 5-year average.

In their latest report the Department of Energy estimated that crude oil stocks increased by 4.8 million barrels compared to the 2.5 million draw expected by economists. This counter seasonal build reflects the lack of demand for crude oil by refiners who are now in the process of ratcheting back their refining runs as they have enough heating oil in stock given the warm weather. Heating oil cracks, which are the margins received by refiners are starting to move lower. This will reduce refinery runs further building crude oil stocks.

Crude oil prices moved lower again on Friday hitting a low of 34.45, and now poised to test the 2008 lows at 32.40. Momentum on crude oil remains negative with the MACD (moving average convergence divergence) index is printing in the red with a downward sloping trajectory. The RSI (relative strength index) moved lower with price action reflecting accelerating negative momentum while printing a reading of 27, below the oversold trigger level of 30 which could foreshadow a correction.

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