Oil Gains on Technical Support

NEW YORK (DTN) -- New York Mercantile Exchange oil futures rose on Monday morning reversing pre-market losses as technical support offset a strengthening dollar and a report last week that showed the first rise in active oil rigs in the United States.

Technical indicators show short-term trend remains up across the oil futures complex, with additional support coming from hope that leading oil producers overseas will rein in oil supply.

At 9 a.m. ET, NYMEX April West Texas Intermediate crude oil futures were 12cts higher at $39.56 bbl ahead of its expiration this afternoon. The May contract was up 23cts at $41.37 bbl.

The WTI contract is testing resistance at $40, the 38.2% retracement level of the prior downtrend from $62.58 through the long term low of $26.05. Next resistance is marked at $44.32, the 50% retracement point from the same downtrend.

May Brent futures traded on the IntercontinentalExchange rose 32cts to $41.52 bbl. The secondary trend remains up. The spot-month contract continues to test resistance at $41.25 and $43.35, price points that mark the 33% and 38.2% retracement levels of the previous downtrend from $69.53 through the low of $27.10.

In products trade, NYMEX April ULSD futures edged up 0.82cts to $1.2473 gallon, while the April RBOB futures contract rose 1.89cts to $1.4462 gallon.

On Wall Street, equities were slightly lower while the dollar rose to a two-day high after bouncing off the five-month low posted last week following the Federal Reserve’s dovish commentary on its monetary policy.

Supply remains the main focus for oil traders. Baker Hughes report showed the number of active rigs for drilling oil rose by one to 387 during the week-ended March 18 and triggered selling on Friday.

The market has been working to establish a bottom in crude oil in recent weeks on the back of falling U.S. output and hopes for a freeze in output by the Organization of Petroleum Exporting Countries and some non-OPEC countries.

There remains uncertainty over the outcome of the April 17 meeting in Qatar between OPEC and non-OPEC producers, which comes six weeks before the regular semi-annual OPEC meeting scheduled for June. Several cartel members indicated they would participate in the plan to freeze output at January levels, but Iran remains opposed until its production reaches 4 million bpd.

Analysts said freezing output may not reduce supply since Russia and several OPEC members including Saudi Arabia are producing at record high levels.

The Commodity Futures Trading Commission's Commitment of Traders report for the week-ended March 15 showed money managers added substantially to existing length in NYMEX crude oil futures, and made moderate adjustments to positions in RBOB and ULSD futures.

The market is now looking ahead to preliminary manufacturing data from China, Europe and the United States, as well as weekly oil supply data to be issued on Tuesday by the American Petroleum Institute and Wednesday.

George Orwel can be reached at george.orwel@dtn.com