Article by ForexTime
Crude oil prices consolidated this past week, but the volatility remains strongly enforce. After surging higher and testing resistance near $94 per barrel earlier in the week, WTI moved back down to where it started the week, at $91.70. Strong production led by innovative technology is keeping a lid on prices, but overall earnings for producers continues to grow, at the expense to revenue ration declined from 30% to 18% over the past 2 years according to the Department of Energy.
Technology such as pad drilling has lowered costs and decrease the time needed to drill a new wells. This has not only increased production for the shale-focused companies, but has contributed to a reduction in operating expenses. The volume of crude oil produced from various shale formations, in particular the Bakken, the Eagle Ford, and the Permian, has increased dramatically. According to the Energy Information Administration the shale group of companies as a whole, increased production to 430,000 barrels per day.
The decision by the Federal Reserve on Wednesday actually seems to have created additional headwinds for the petroleum markets. With the Fed increasing its estimate of interest rates in the future, medium and long-term yields moved higher. This led to an increase in the dollar, which in turn generates headwinds for oil prices.
Oil prices were unable to move above short-term resistance near the 20-day moving average at $92.07. Target resistance is seen near a downward sloping trend line at $93.30. Support is seen near an upward sloping trend line that connects the lows in January to the lows in September and comes in near $89.50. Momentum has turned positive but the trajectory of the MACD (moving average convergence divergence) index is flat. The RSI is also consolidating and printing a reading of 42, which is in the middle of the neutral range.
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