Oil prices may be finding a broadly welcomed equilibrium
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The West Texas Intermediate oil futures contract, by mid-session on Wednesday, had traded in an intraday channel of $42.50 to $46.78 a barrel over the past 15 days.
By recent standards that 10 per cent range over such a period is bordering on the somnambulant.
Still, frazzled energy investors won’t be complaining.
The idea that oil prices may be finding some kind of equilibrium level will be welcomed not just by producers but also the broader market, given the whipsaw action in stocks that energy wobbles have engendered of late.
Options traders seem to agree that a more muted market is on the cards.
It is nearly half the level it touched in February, when WTI hit a 12-year trough around $26 a barrel.
Of course, whether this period of relative calm proves to be just the eye of the storm is unknown.
Yes, US oil production growth has slipped in response to the recent fall in prices.
But with Opec unable to agree an output cut and large US inventories, ample supply remains a weight on prices. Any sign of faltering demand should the global economy weaken and oil prices will suffer again.
Meanwhile, bulls of a technical bent note that the WTI’s 50-day moving average has just broken above the 200-dma. But the 200-dma remains downward sloping, so that is not quite the “golden cross” of chartist lore.
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