Nadia Simmons: The first days of the new month have been hard for oil bulls. After a breakdown below the lower border of the declining trend channel, the buyers didn’t manage to stop oil bears. The bears showed their claws on Thursday and pushed the price below the October low. This event resulted in a heavy decline, which took light crude below $95. On top of that, yesterday we saw further deterioration and crude oil dropped to a new monthly low of $94.06.
The selloff in crude oil has been fueled by rising U.S. stockpiles, which have climbed roughly 8% over the past six weeks as refiners have curbed their crude processing amid seasonal maintenance work and waning gasoline demand. Last Wednesday, the U.S. Energy Information Administration said crude inventories rose by another 4.1 million barrels in the week ended Oct. 25. Total inventories now stand at 383.9 million barrels and government data this week could show that stockpiles finished October at their highest level since 1930.
Taking the above into account, we can conclude that crude oil has traded lower as traders view the market as adequately supplied. Even output declines in OPEC member Libya, home to Africa’s largest oil reserves, have not contributed much upside to oil prices.
Yesterday, light crude extended losses as ongoing concerns over rising U.S. inventories and weaker demand in the world’s largest oil consumer drove prices lower. In this way, the price dropped to a new four-month low of $94.06. Taking this fact into account, investors are probably wondering where the final bottom of the current correction is.
In today’s essay we take a closer look at the chart of crude oil from the medium term perspective to see if there’s anything on the horizon that could drive the price of light crude higher (charts courtesy by http://stockcharts.com).
Looking at the above chart, we see that the price of crude oil declined once again in the previous week and dropped below $95. Yesterday, we saw further deterioration and light crude hit a new monthly low of $94.06. In this way crude oil slipped below the 50% Fibonacci retracement level based on the entire June 2012-August 2013 rally. However, the breakdown is not confirmed at the moment. With this downward move the price reached the medium-term support line based on the September 2012 and January 2013 highs.(...)Click here to continue reading the original ETFDailyNews.com article: The Oil Stock Index and Its Relationship With The Stock MarketYou are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)