Crude Oil Range Bound; Investors Await Fresh Guidance from Fed Members

U.S. energy markets edged lower in Asian hours Monday as investors continued to monitor data on supply and key economic indicators that could give them clues as to the direction of the market later in the session.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded down to $45.13, or 57 cents. November Unleaded Gasoline was down $.0113. November Brent crude on London’s ICE Futures exchange fell $0.44 to $48.16 a barrel.

Volatility and volume were down during the Asian session with traders unwilling to commit heavily in either direction. Additionally, Hong Kong, South Korea and Taiwan are closed, limiting the price swings.

Oil prices closed higher last week after posting a choppy, two trade throughout the week. NYMEX futures were up 1.5% and Brent crude was up 2.4%.

For the week ahead, November crude oil futures are expected to continue to remain range bound with support at $44.28 and $42.91. On the upside, if there is a rally, the market is not expected to overcome resistance at $50.04 and $50.69. Brent support is at $47.63 a barrel.

November Unleaded Gasoline futures have support at $1.3371 to $1.3039. Resistance is $1.4775 and $1.5270.

Crude oil could move later today, but not because of supply issues. Demand may be the issue because of a possible move in the U.S. Dollar. Later today, several Fed members are set to deliver speeches. If they are hawkish about the timing of the next Fed rate hike then the dollar could rally. This could hurt foreign demand for crude oil since the commodity is dollar-denominated.

Late Friday, Baker Hughes reported the number of rigs fell for a fourth straight week. Traders will continue to monitor the supply side of the market to determine if this figure will continue to fall due to the low prices. According to Baker Hughes, the number of rigs drilling for oil in the U.S. decreased by four last week to 640. A lower U.S. rig count is usually supportive for prices as it signals potentially lower future production.

On Wednesday, investors will get the opportunity to react to the latest inventory figures from the U.S. Energy Information Administration. Because of seasonal maintenance at refineries, gasoline may see an inventory dip while crude oil may see an increase.

On Friday, the U.S. reports on the labor market. September Non-Farm Payrolls are expected to show the economy added 202K new jobs. Crude oil could move on this report because a strong number will signal a strengthening economy which could lead to greater demand. Gains could also be limited because it will likely move the Fed closer to a rate hike.