Crude oil prices were range bound last week between 4900 and 5100 and ended lower at 5033 posting a weekly loss of $1.91, its biggest 1-week loss since mid-February and first significant decline since reaching a yearly high at 5466 in March. Crude has struggled to move higher in the past three weeks as the demand picture remains weak and crude stocks continue to build along with technical exhaustion after gains for 7-straight weeks beginning at the 3400 level.

The Energy Department reported on April 15 that crude-oil inventories rose 5.67 million barrels to its highest level since September 1990 at 366.7 million, thereby fueling the weekly decline in prices. The market also ran into technical trouble through out the week at its 20 day moving average which added to the downside pressure.

As a new week begins, we can anticipate volatile conditions early on as the spot May contract expires on Tuesday and is set to open below the 10-week uptrend line (10 W ^ TL) crossing at 5070. We can take a ‘sell rallies’ approach with failures for the Spot contract to regain 5070 keeping the action under pressure with a high probabilty of probing into the 4885 to 4700 range. Only trade this week that can stabilize above 5070 will be a sign of higher price action over the course of the week.

JUNE FUTURES
With the daily trend pointing down, and this week set to gap open below last week’s June lows at 5145-5160, along with a break of the 40 D ^ TL, expect to see bearish trading into the 5070-4960 initial support range. Trade below 4960, the 50 DMA, will sustain weakness generating corrective drives to 4900-4800 and potentially to the 4735-4700 key Support area. A press below 4700 is very bearish on crude oil prices and likely to send the market tumbling lower towards the 3 M ^ TL CHNL within the 4570-4450 range on subsequent moves.

With the June contract trading at a premium to May, it will remain closer to the 10 W ^ TL setting the stage for a potential bullish scenario if initial weekly Support at 5070-4960 holds after Tuesday’s expiration. If this occurs, and prices regain last week’s lows at 5145-5160, expect to see recovery trade and a retest of the 20 day moving average for the June contract at last week’s highs at 5300-5330. However, only moves above 5300-5330 will reinforce bull strength paving the way to challenge the 2009 high at 5466 and possibly extend advances to 5600. Producing settlements above 5466 will reinforce the Bull camp with an objective at 5900-6000 in the weeks ahead.