The WTI Crude Oil markets fell rather significantly during the course of the session on Tuesday, slamming into the $45 handle. We initially trying to break above $48, but that offered resistance yet again as we had seen quite a bit of selling pressure above there on Monday as well. However, you have to keep in mind that this move that we have recently had was massive and a bit overdone. At this point in time though, I think that this could be a market that we will have to keep an eye on.

After all, today features the Crude Oil Inventories number coming out of the United States. With that, we will more than likely have some type of volatility in this market. If we get more of a drop in the inventories than anticipated, that could turn this market right back around. Regardless, I cannot help but notice the impulsiveness of the move recently, and that means to me that we could perhaps be trying to change the trend.

Unsustainable pricing

Most places around the world simply cannot sustain oil production when it is less than $40 a barrel. Because of that, it is only a matter time before people stop drilling. Once they do, that will naturally drive the value of oil up as supply dwindles. This is more or less a long-term call but I think we are starting to see the effect of that exact scenario. Because of this, I think long-term traders are starting to put money into this market. In the meantime, I’m going to look at pullbacks as potential buying opportunities but recognize that a lot of volatility is coming into the market on an almost daily basis.

In fact, I have been trading this market via ETFs and CFDs. Using highly leveraged positions is probably going to be very difficult, and as a result I feel that you must err on the side of caution.