The WTI Crude Oil markets fell during the session on Wednesday, rallying below the $105 level. This was an area that I suspected would offer little bit of support, but quite frankly it's not a large area overall. Granted, the number is a "large round psychologically significant number", but in the end it's not anything to be too excited about. After all, the trading range between $103 on the bottom, and $109 on the top. In between there is a lot of noise, but at the end of the day I believe it is what is going to be known as the "summer range."
There are a lot of things pushing the oil markets around right now, but without a doubt the biggest thing would be the Federal Reserve. If the Federal Reserve tapers off of quantitative easing, you can expect a pretty significant moves lower in this market as the US dollar would certainly appreciate rapidly. On the other hand, if they do not taper off, there would be a lot of traders covering dollar longs, and the US dollar pushing the value of oil higher.
Fundamentals don't matter at the moment
Fundamentals far supply and demand don't matter at this moment, and as a result I still believe that it's all about the US dollar. I hate to write off most of what the market is based upon that one thing in general, but I really see no other reason for this market to go back and forth. Because of that, I think that the market will find its way sooner or later, but in the end the markets will certainly struggle to suggest that there is a supply shortage at this point time, especially one that facilitates higher prices like we see. Nonetheless, I do think that we are going to be stuck in this range until September, probably even the middle of that month.
Buying opportunities are down at the 103 level on support, but this is a short-term set up. Nonetheless, it's about the best trade that I see coming towards us. If we do get below the 103 level though, we could see a slight fall down to $99.