Market Quiet Ahead of FOMC, OPEC
Fundamentals
Crude Oil futures are weaker ahead of tomorrow's OPEC meeting, which is widely expected to be a non-event. The Oil cartel is not expected to change its production quotas, as they have to be pleased with where prices are in light of current global economic conditions and the resilience of the US Dollar. The Crude Oil market has already priced-in an economic recovery for the most part, and prices are relatively high for the current market fundamentals. Supplies are ample at the moment, and we will be entering the low demand period between peak winter heating demand and the driving season, which could buffer current inventory levels. Today, traders' focus will be on the Fed, as the FOMC will make their rate decision today. Like the OPEC meeting, there is no expectation of a change in the status quo, but traders will likely closely watch what the central bank has to say about rate policy going forward. If there is any indication that rates will be raised sooner rather than later, Crude Oil could find itself under pressure. Given the lack of new positive economic developments, Oil prices favor a slight negative bias over the near-term, with the potential of trading into the low 70's, barring a significant pullback in the Dollar or inventory shock.
Trading Ideas
Given the lack of fresh bullish fundamentals and technical resistance, the Crude Oil market can be seen as neutral over the intermediate term and bearish in the near-term. Some traders may wish to take advantage of the range that Crude Oil has found itself in consider shorting the May Mini Crude Oil futures contract with a protective stop at 83.25 and a downside objective of 74.00. The trade risks roughly $1,500 for a potential profit of $3,000.
Technicals
Turning to the chart, we see prices reaching the upper end of the range the market has found itself in since last fall. Since October, prices have been trading between 70.00 and the low 80's. The first area of support below current levels comes in around the 78.00 level, with more significant support near 74.50 and 72.50. On the upside, resistance comes in around 82.25 and the elusive 85.00 level. Momentum is beginning to show bearish divergence from the RSI, signaling a bearish near-term bias.
Robert Kurzatkowski , Senior Commodity Analyst
