Oil Prices Crash on Production Fears

It was generally a slow day in the markets yesterday after a lot of activity and volatility surrounding the UK polls on the previous day and we know that it is a slow day when the star of the day turns out to be the oil prices. The oil prices have a tendency to trade slowly for days and weeks before they spend 1 or 2 days with a flurry of activity in either direction and then followed again by days and weeks of slumber. This is how the oil prices had been over the last week or so but that was compensated by the large drop that we saw in the oil prices yesterday when it fell by over 4% at one point of time. The prices recovered towards the end of the day to close around 3.5% down for the day but the damage had been done.

Oil Prices Fall

The reason for the fall in the oil prices was the oil inventory data that came in yesterday. Though it did show a fall, the fall in the inventory was not as much as the market had expected it to be. There were also doubts cast in the market on whether the oil producers would be able to continue with their supply cut agreement once the present phase of the deal got over towards the middle of the year. A combination of these factors and the fact that the dollar held steady made the oil prices to drop through $52 and then $51 and made its way towards the strong support at $50.5 before it recovered a bit and it now trades just above $51 as of this writing. We expect the $50.5 region to hold the prices in the short term and we should see a decent recovery in the oil prices during the course of the day.

Gold prices also weakened yesterday as the dollar managed to steady itself against most instruments and this helped to ease the risk factors around the world which pushed the gold prices below the 1280 region. It has not been a clean break so far and we expect this region to continue to hold the prices for the rest of the day as the bulls prepare themselves for the next leg.

Silver prices broke through the support region around the $18.3 region, which we had mentioned in our forecast yesterday. We had also mentioned that a break of this would lead the silver prices towards the $18 region and it trades just above that as of this writing. The region around $18 should see a lot of buying and we expect this region to hold for the day and push the prices back up.