Oil futures plunged on Monday and followed through to the downside today, with the contract for February delivery on the New York Mercantile Exchange falling nearly 2% to $50.87, the lowest level since December 8th.
Oil futures fell on Monday following Friday’s Baker Hughes Rig count report. The report showed total rig count increased by 7 to 665 rigs, following the prior week’s increase of 5 rigs. The U.S. oil rig count increased by 4 to 529 rigs this week, up for the 10th consecutive week and at a 1-year high.
Today, prices fell over concerns regarding OPEC output increases. According to a report from Reuters, Iraq plans to raise crude exports from its southern port of Basra to an all-time high in February, keeping exports high even as OPEC production cuts take effect this month.
With today’s move to the downside, oil futures are now testing key support at the December $50.76 low. A sustained drop below this level would confirm a double top reversal pattern. The downside objective derived from this double top is at approximately $46/barrel.
If prices can stabilize in tomorrow’s session, first resistance is at the $52.00/barrel followed by the mid-point of Monday’s price range near $52.80.
A further move lower over the near term in the presence of an oversold condition would be considered a sign of weakness. The next chart-based support comes in near $48.00/barrel. A continued decline that is sustained at week’ end would also negate the recently confirmed longer-term head and shoulders bottom formation as well as its $72/barrel upside target.
API data will be released later today. EIA data will be released tomorrow at 10:30 ET.