Nearby Crude Oil Monthly Technical Analysis for November 2014

Nearby Crude Oil futures plunged last month, driven by overproduction and slow demand. The close near the low suggests the selling pressure may continue into November although short-term oversold conditions are expected to produce periodic short-covering opportunities.

The U.S., Russia and Saudi Arabia are being blamed for the overproduction while slow demand is coming from the Euro Zone and China. Changes in technology and improved drilling strategies are helping the U.S. to produce more oil. Russia is selling all it can to raise cash since it is being shutout of the international banking system because of sanctions imposed by Europe. Saudi Arabia says it is comfortable with $80.00 crude oil so a cut in production is unnecessary at this time. It did, however, lead Kuwait, Iran and Iraq to cut prices of crude to Asia.

Shrewd traders have probably noticed that oil stopped going down in October after the Saudis made their price cut. Although not as strong as a production cut, it did send a message that they and other OPEC nations will be willing to take action if prices get uncomfortably lower.

With OPEC meeting in November, there is going to come a point where short-sellers are going to challenge its ability to hold prices near $80.00. If the selling pressure resumes then previous bottoms at $78.75 and $74.06 are likely to be tested. If there is a total collapse then watch for a test of $63.63. This is not likely in November, but could occur over a number of months.

The five year range is $63.63 to $115.70. The mid-point of this range is $89.67. This price should act like a pivot. Since the market is trading under this price, the bias is to the downside this month. The bearish conditions could change, however, if OPEC decides to cut production.