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.
Daily Energy Report – The oil markets may trade higher again in the near-term, however, the fundamental picture still remains somewhat weak at the moment.
WTI futures bumped up against resistance from the 50-day MA at the day’s high yesterday, but the rally was assisted by favorable news on the Seaway pipeline and some progress made on the fiscal cliff. A breakout above the 50-day will likely require further progress on cliff negotiations as well as signs of economic growth and improving oil fundamentals.
Oil markets may continue their sideways trend this week, as the trade continues to face pressure from a lack of progress on the fiscal cliff. Background pressure will remain in effect from growing domestic oil production, elevated oil inventories, and last week’s hold at the 50-day moving averages in Brent and WTI.
Oil prices created an inside-day in WTI yesterday and both Brent and WTI again had trouble with their 50-day moving averages. Those technicals may offer pressure again in today’s trade, where the market will also be weighed down by continued growth in U.S. oil production, growth in oil stocks, building gasoline inventories, and generally weak demand.
Oil prices rallied nicely in yesterday’s trade but once again had trouble getting above the 50-day moving averages in WTI and Brent. Today’s trade could witness a similar disposition, as the general reaction by risk markets yesterday to “bullish” news from the Fed was to finish either lower on the day (as equities did) or significantly below the day’s highs (as energies and precious metals did).
The market appears as though it will trade to the downside in the near-term thanks to Monday’s break of key channel support and due to the inability to maintain rallies. Pressure may also come from a lack of progress in fiscal cliff talks, the potential that OPEC leaves production unchanged at today’s meeting, building levels of U.S. gasoline stocks, and high levels of U.S. oil production.
Energy Price Outlook Oil prices may trade lower in the near-term, as Monday’s action failed to respond to moderately favorable developments. There was support for yesterday’s trade given by the bottom of a rising channel pattern at $86.20 and from a recovery in economic data from China and Germany. However, an uninspiring trade in the stock market and a lack of progress in fiscal cliff talks added on to other
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