It was deja vu all over again for the oil markets yesterday, as both WTI and Brent made small losses within inside-day trading ranges. The incremental information in yesterday’s session basically included pressure from weak oil demand and increasing worries about the upcoming German local elections, while support came from increased speculation about accommodative monetary policies in Japan and China
WTI is showing difficulty in trading above the $94.00/bbl price level, while Brent is doing the same near $113.00/bbl. The oil markets may continue to remain range-bound in the near-term, as influencing factors are somewhat mixed. The upside will focus on improving economic data, buying by managed money accounts, and fresh refinery issues with Motiva
The oil market may remain in a mixed trend in the near-term as it has in the last three sessions, with underlying factors somewhat balanced. Recent support has been given by improved signs of economic growth, COT data, the grounding of Shell’s oil rig in Alaska, and the ramp-up of the expanded Seaway pipeline this week. Environmental groups have already called on the president to suspend drilling permits in the Arctic
The short-term trend of the energy markets has been on the upside for nearly a month now, but prices are approaching levels that have traditionally caused problems for rallies. The weekly chart below suggests that WTI may be able reach the falling trendline near $101/bbl without creating any appearance of excess, however, demand would then become a concern as rationing will eventually return
Our view of the oil markets is generally unchanged today from the outlook we made yesterday. Prices could continue higher over the next week or so, but we remain cautious about the ability of the rally being maintained.
Oil prices could continue higher over the next week or so, but we’re cautious about the possibility that yesterday’s rally has difficulty being maintained. The market may gain support from signs of improved economic conditions following PMI data in China and the U.S., the breakout in S&Ps to 2 1/2 month highs, signs of fund buying in COT data, and the military exercises being conducted by Iran
2013 Energy Outlook – Despite the relatively sideways trading range and declining volatility that the last few months of 2012 has brought the oil markets, underlying developments have remained fairly dynamic. The November election in the U.S. and change of power in China
Monday’s trade fell sharply and in stark contrast to the strong rally that was witnessed on Thursday. The focus was on forecasts for temperatures that did not show any more cold than what was seen on Friday, and actually warmed slightly.
The sharp drop in energy markets on Friday was a demonstration of the influence that economic issues in Washington can exert on oil prices. Near-term trading direction will thus be influenced one way or the other by what happens with fiscal cliff negotiations over the weekend and between the Christmas and New Year’s holidays
It’s difficult to say that yesterday’s rally and breakout above the 50-day MA in WTI and Brent will create an environment of bullish euphoria in the near-term, because the same conditions have played themselves out several times in the last two months.
