Crude oil futures for March delivery on the New York Mercantile Exchange hit a fresh six-week low of $96.44 a barrel as of this writing Thursday. The leader of the raw-commodity sector spent last month trending modestly lower from the Jan. 4 monthly high of $103.90, and recent chart action suggests there is still more downside price potential in the near term.
Since mid-November, crude prices have been trading in a choppy and sideways fashion at price levels that have not strayed far from the key $100 mark. On the daily chart for March crude, the sideways trading range is marked by strong technical resistance at the January high of $103.90 and by strong support at the December low of $92.95.
Given the four-week-old price downtrend on the daily bar chart, technical odds favor March crude challenging the bottom of the trading range ($92.95) in the near term.
Should nearby crude oil futures prices drop below that trading range, serious near-term technical damage would be inflicted -- to then suggest a quick challenge of psychological support at $90 or even $85.
As for upside potential, providing the bulls with fresh upside near-term technical momentum would take multiple daily closes above major psychological resistance, at $100, in nearby Nymex crude oil futures prices. A close above the top of the trading range (above $103.90) would produce significant bullish momentum to suggest a challenge of $110.
From a fundamental supply-and-demand perspective, the bellicose rhetoric exchanged between Iran and the U.S. in January has at least temporarily faded to the background of the marketplace. The market took in stride recent proclamations from Iran that it may head off the European Union by immediately halting its oil shipments to the bloc. The EU has slapped economic sanctions on Iran for its nuclear ambitions by saying it will begin halting Iranian oil imports July 1. Any flare-up in Middle East tensions would quickly ignite a sharp rally in crude-oil prices.
On the domestic side, the supply-and-demand fundamentals are near-term bearish for crude oil futures. The weekly Energy Department report this week showed a surprising build in crude oil inventories of 4 million barrels. Gasoline stockpiles increased by 3 million barrels as U.S. gasoline demand is at a 10-year low.