Crude oil prices charged towards the $70 per barrel price point on Thursday, recouping the previous oil trading session’s losses and leading a rally in many other commodities such as spot gold and silver. A major factor supporting such a strong price move in daily oil prices was an upbeat forecast from Goldman Sachs who have reviewed their price target for crude oil from $65 to $85 per barrel by the end of the year. This is, of course, the same Goldman Sachs who as recently as 28th April stated that it expected crude oil prices to drop to $45 a barrel owing to the extent of oil in storage. The disconnect between the price of oil and oil market fundamentals continues and evidenced by US consumption alone which dropped 900,000 barrel a day last week, confirming that US demand is at a 10 year low and hardly suggestive of an economy that is cultivating the green shoots of recovery. Nevertheless Nymex WTI rose to $69 a barrel before settling at $68.81 and ICE July Brent added $2.83 to close at $68.71 a barrel. The major issue for daily oil prices today will be the non farm payroll numbers and their effect on the somewhat beleaguered US dollar.
From a technical perspective yesterday’s wide spread up candle, added momentum to the move, with the low of the day once again bouncing off the 9 day moving average, as for Wednesday, which is always a strong signal that the trend has support, and therefore likely to continue for some time to come. This phenomenon is often seen in strongly trending moves ( both up and down) and is a great signal to look for, as the support provided by the 9 or 14 day moving average, provides a clear indication that any temporary reversal is just that , temporary, and the the original trend will continue in due course. In other words it is simply the market taking a breather before continuing in the original direction once again, and indeed this is clearly demonstrated several times on the daily oil chart in the current trend of the last few weeks from the breakout at the end of May. With yesterday’s strong move upwards we know have both the $70 and $75 per barrel price points clearly in our sights!
The short term and medium term are bullish, the long term is sideways.
WTI:
Support: $65.92 (yesterday’s low) Resistance: $71.20 (high of 22/10/08)
Support: $64.96 (low of 03/06/09) Resistance: $70.53 (high of 30/10/08)
Support: $64.74 (low of 29/05/09) Resistance: $69.60 (yesterday’s high)
OIL (BRENT):
Support: $65.84 (yesterday’s low) Resistance: $71.90 (high of 17/10/08)
Support: $64.91 (low of 03/06/09) Resistance: $70.15 (high of 16/10/08)
Support: $63.96 (low of 29/05/09) Resistance: $69.50 (yesterday’s high)
