Struggling Crude      

Fundamentals

After closing below the $90 per barrel level for the first time in 7 months last week, Crude Oil futures have attempted to rally above this key support level, but are running into resistance as many traders' "risk off" mentality continues. On Tuesday, after the long Memorial Holiday weekend, Oil prices initially rose, trading above $92 per barrel for the first time in three sessions, as an impasse in talks between major world powers and Iran over its nuclear program surfaced. In addition, bargain hunters bought Crude Oil futures, as it appeared that prices have become "oversold" based on some technical indicators. However, Tuesday's price gains failed to hold, as a weaker than expected U.S. Consumer Confidence report and stronger U.S. Dollar brought sellers back into the market by the close. Both large and small speculators continue to unwind net-long positions in Crude Oil, according to the most recent Commitment of Traders (COT) report. For the week ending May 22nd, speculators shed just over 20,400 net-long positions in Crude Oil futures. Though this is a large decline, the net-long position still remains quite large, currently standing at nearly 250,000 contracts according to the COT report. Until we see some signs of stability coming from the Eurozone or sanctions against Iran do occur on July 1st, we may see continued long liquidation selling in Crude Oil capping any rally attempts as traders exit "risk" positions and move towards gaining liquidity during the uncertainty surrounding global events.

Technical Notes

Looking at the daily chart for July Crude Oil, we notice prices holding well below both the 20 and 200-day moving average, giving both long and short-term Oil bears the edge. The 14-day RSI has failed to move out of oversold territory despite Tuesday's early rally attempt and currently reads a weak 26.18. Traders who follow Fibonacci retracements may note that prices are hovering around the 61.8% retracement level. Oil bulls must see prices hold this level or a test of the 78.6% retracement level near the 84.50 area increases. Near-term support is seen at last week's low of 89.28, with resistance found at the 20-dy moving average, currently near the 95.75 area.