Oil correction continues
During his inauguration address early yesterday evening, President Donald Trump declared that he was calling a national energy emergency, aimed at raising fossil fuel production. This did little to support the price of crude. Although in fairness, it appears that the market had anticipated something along those lines, as the sharpest part of yesterday’s sell-off came over three hours earlier. Crude managed a brief bounce overnight, as the new president signed a stack of executive orders. But the selling has continued this morning, taking front-month WTI back down to levels last seen eleven days ago. Mr Trump’s full-throated yell for US producers to: ‘Drill, baby, drill!’ is not new. And it’s perfectly logical that prices should fall at the prospect of increased supply. But producers are highly price-sensitive, and there comes a time/price where it’s uneconomical to raise production. In the meantime, crude is undergoing an overdue downward correction following a sustained rally since early December. Traders will have to see how far and how protracted this correction turns out to be. There’s some early support just south of $75. This marks the 38.2% Fib retracement of the 6-week rally. The 50% retracement comes in around $73.40. Whatever happens from here, the daily MACD needs to reset at less-overbought levels. So, the sell-off may continue for a while yet.
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