Crude oil has continued to trade to new swing lows, and on Monday morning it is trading below the major $94.76 level. This is the lowest level we have seen since June, and at this point, the $93.71 level from June 26 will be seen as the next level of support.
So what has driven crude down so sharply from late August, when it made a high above $112?
First, any geopolitical tensions have largely left the market. Second, inventory data have been bearish, as we have seen a continued build in supply. Third, the knowledge that the Federal Reserve will have to begin tapering its bond purchases has led to a stronger dollar, and consequently hurt crude.
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At this point, all eyes are on the psychological $90 level for crude oil, and a close below $94.76 could indeed bring $90 into play.
Look for a stronger dollar to signal further selling in crude. To be specific, if the Dollar Index rises above 81, that will be considered very bearish.
(Read more: Why crude oil deserves to drop to $90: Pro)
A downturn in the dollar could provide support for crude oil early in the week. But note that on the crude oil chart, only a close back above $95.95 will signal a consolation higher.