Look for the slow drift lower to continue in the near-term, as worries about the health of the economy and the fiscal cliff dominate. Stocks sold off yesterday on various corporate and European news items, but closed near the bottom of last week’s trading range as well as close to a new four-month low.
Daily Energy Report – The slow drift lower in oil prices should continue in the near-term, as worries grow over the fiscal cliff and the slow rate of economic growth. WTI could fall toward $80.00/bbl over the next few weeks as fiscal cliff negotiations appear likely to continue through the end of the year, U.S. production continues to grow, U.S. inventories remain elevated, and as problems in Europe remain in place
Energy Price Outlook After a sobering week last week, oil prices are expected to be under pressure again in this week’s trade and potentially fall toward $80/bbl in WTI over the next few weeks. The dominant factors should be increased prospects for slow growth in the U.S., uncertainty over the fiscal cliff, events in Europe including Sunday’s vote in Greece, and OPEC’s cut in demand estimates on Friday. The
Oil prices are a tough call this week. The market received positive news on Friday through better-than-expected jobs data, but prices fell to five-day lows in WTI because the dollar advanced and stocks dropped. We had looked for the oil market to advance in the near-term based on better claims and ADP employment data,
Today’s trade will focus on the employment report for guidance on the “risk-on, risk-off” trade, and will also keep an eye on the presidential election next Tuesday.
Energy Price Outlook The oil market is expected to eventually make a move above the top end of the past week’s consolidation pattern in a more decisive manner than yesterday’s intraday “breakout.” We think that fund selling which has been prevalent in the last few weeks could diminish as many hedge funds closed their books throughout late-Oct. Support may also come from the restart of Northeast refineries, technical factors,
The oil market appears to be locked in a sideways continuation pattern, however, the timing of a potential breakout may still hinge upon the trading floors opening for normal operations. The CME said late yesterday that Nymex floor trading would resume only when the city lifts its evacuation order for Zone A.
Today’s session will likely be muted again by the closure of trading pits in New York, but we expect moderate pressure to remain in place. The market may be setting up for weakness through tomorrow, when many hedge funds are expected to close their books for the year.
This week’s trade in the oil market may witness bottoming action take place, as the U.S. election begins to move to center stage. There may also be an exit from the markets by hedge funds that close their books on Oct 31st, but the impact they actually exert may be somewhat limited in the near-term as their long positioning has already been reduced.
The oil market stabilized its short-term selloff yesterday and rebounded slightly, but evidence is unclear as to whether a bottom has been formed. The action was not typical of a bottom, as volumes appeared to be light and fresh economic data was mixed.
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