Oil prices are on the move lower for a 2nd straight day following the monthly drilling report from the EIA that shows that overall production and output per well are both climbing as the technological phenomenon known as hydraulic fracturing continues to make the bulls nervous. It’s much too soon to declare victory for the bears however as prices did stage a meaningful bounce off of Monday’s lows, and there is still some technical support that must be broken before we see the next move lower.
Even since the 7-month long bull trend was broken in February, most futures prices have been chopping back and forth in what is beginning to look like a triangle pattern on the charts. These patterns can mark either a continuation of the current trend, or a reversal of it, depending on which way they break. At this point, prices are closer to the low end of that triangle, and are set up for another wave of selling if we see a breakdown this week.
There was supposed to be a meeting at the Whitehouse Monday to discuss the RFS but it seems that was either delayed or cancelled. It’s unclear whether that change had something to do with a settlement proposal between the EPA and PES which would relieve some of the bankrupt refiner’s RIN obligation. Renewable Fuels groups are clearly upset about the settlement and nervous about the various proposals floating around Washington these days as you can see by a search of the RFS online, or in ethanol RIN values that are trading in the mid 30s this morning for the first time in nearly a year.