Oil Price

Back on Feb. 5, I posted that the oil price was subject to a hit to the downside. The 52 wk
price momentum had assumed parabolic proportions in relatively short order and speculative
long positions in the futures market had reached record levels. Too much was riding on a
continuation of a sharp rise in the price.  Oil Price

Price momentum has come way down and the grandly elevated speculative long position has
been partly unwound. the uptrend in the oil price since early 2016 has been broken. The price
is now veering toward an intermediate term oversold but has room to head lower before it
reaches that level. Oil has remained in the $40 - 60 bbl. consensus range and there is near term
support down at roughly $44.

Oil demand has firmed as expected, but production has been larger than earlier consensus had
it as others ex the OPEC core production cutters boosted output, including the US. So, the
market is not yet in balance on supply / demand and oversized inventories of crude have moved
higher. The financial damage to the industry from the 2014 - early 2016 price bust was not
sufficient to wipe out much marginal production, and the Saudis will have to keep that in mind
in deciding whether to hold back OPEC output beyond the Jun. 30 termination of the current
production cutting deal. It might be wise to wait and extend the deal to see if rising demand
picks up what is now a small surplus in daily output before going 'nuclear' again.

With a strong bullish case now more elusive in the near term, I would not mind seeing the
still large speculative long position in the futures market unwound further before showing
further interest.