Traders appear to be in wait and see mode at the start of the week, with attention firmly on the central bank meetings this week, most notably the Federal Reserve on Wednesday when we’ll find out if policy makers successfully guided market expectations in the right direction or went too far.
Crude oil futures are still reeling from last week’s massive crude oil build and another jump in U.S. rig counts. It was a double-eight as oil rigs increased by eight and the eighth week in a row that the rig count has risen.
The crude oil bull market in the short term is in critical condition and needs to close back above $50 a barrel to try and negate this week’s massive downside break out. There is still hope that the technical damage done to this market can be repaired but it may take a decisive close back into the old sideways range to try and mount a comeback.
The Saudi Oil Minister, Khalid Al-Falih, says that OPEC cuts have exceeded expectations of 1.5 million barrels of oil a day, but you would not know it by the jaw dropping 11.6-million-barrel crude oil increase reported by the American Petroleum Institute! Even with a bullish 5-million-barrel drop in gasoline supply, the largest weekly drop since April of 2014, and a supportive 2.9-million-barrel drop in distillates the shock value of that massive crude oil build was too hard to just shake off.
The volatility in the crude oil market is at a 28-month low but that complacency in the market may be short lived as the International Energy Agency warns of looming oil supply shortages during the next three years. This comes as Exxon Mobil makes a big investment in the coming U.S. oil boom as it plans to invest $20 billion in the Gulf Coast creating 35,000 construction jobs and 12,000 permanent jobs as it seeks to position itself as the U.S. becomes a major oil and gas exporter.