Crude sellers in short supply

April 20, 2015 10:22 AM

Trade in the overnight session was fairly muted as the crude backed off of its yearly highs achieved in yesterday’s session. The bullish sentiment remains in effect though it is a slogging rally for the most part rather than a flight to quality parabolic move. The fear bid based on possible global conflicts is more present now than it has been all year. While there is no imminent threat that should produce any significant further rally, it is the underlying support this creates that is keeping new shorts out of the market clearing the way of top side Resistance as the market charges higher. The Saudis in Yemen; Iran nuclear talks; Russia and the Ukraine; These are all potential cauldrons that have traders no longer looking at the short end. It has been sometime since you have heard the irrational call for $25-a-barrel. 

Reduction in supplies, or more accurately less than expected builds in supplies, have added fuel to this bullish momentum. The somewhat fickle major media has stopped its broadcasting from storage facilities as the landscape has shifted. Can the demand keep up with the supply is the real question now. Those consumers in the physical product are most likely looking to the recent price action with some trepidation as the need now to hedge from the long side and/or secure physical long term resources at these prices become more prevalent and further adds to the bullish tendency.

Data in the United States today can have some effect on the price discovery as inflationary data such as CPI and confidence data like the Michigan number are bellwether data points in determining the immediate interest rate picture.

Yesterday’s natural gas storage report showed a bigger build in supplies than expected. This seemed to have bottomed out the price discovery as several year lows were seen down to 2.47 yesterday. All eyes will now turn to the spring weather to see if the spring turns out to be hotter than expected or not. Should we begin to see some end to the price decline for natural gas then look to the gap in price discovery from a technical perspective above at 3.27 for a target/resistance.

About the Author

Tory Enerson is a senior market strategist with the Zaner Group in Chicago, an Independent Introducing Broker. He has been in the futures industry for over 20 years. Beginning his career at the CBOT in 1990, Enerson worked his way up through the industry when he became a member of the CBOT in 1998 and traded for over a decade before beginning to work with clients as a market strategist.