Daily Oil Prices 31 July 2009
Yesterday’s dramatic reversal in the fortunes of daily oil prices can only be described as “bizarre” as there is no logic than can be applied either technically or fundamentally to a move of such magnitude. The fundamental picture has not changed as the world is still awash with oil and oil products which, even if demand were to turn upwards, will still take time to work through the system. One explanation we can apply is that with equity markets determined to hold onto recent gains and speculating that recovery is very much on the horizon the oil market is factoring in such a scenario. Of course our good friends at Goldman Sachs can always be relied upon for a plausible explanation, their latest being that the recent weakness in crude fundamentals is only “temporary” and that they are still calling for crude oil prices to be at $85 dollars a barrel by year end. In addition the oil market was also reassured by the Bank of China’s declaration that it would continue with its loose monetary policy and continue its lending programme. Given that the Bank of China is probably one of the few banks with any money to lend it’s no wonder the markets responded so strongly. In addition yesterday’s move was not accompanied by any major weakening of the US Dollar as the Dollar Index moved sideways for most of the day, and with no large swings in Dollar sentiment other commodities such as gold and silver only posted minor moves higher. Finally there is always good old fashioned market manipulation which is ironic given the current CFTC hearings! From a technical perspective (although I am not sure whether this has any validity given the above), yesterday’s wide spread up candle completely obliterated the losses of Wednesday, closing back above both the 9 day and 14 day moving averages and only marginally below the 40 day, creating in effect a two bar reversal, from which one would expect a move higher. Given the above analysis, and the fact that it is both month end and the weekend it may be prudent to step aside from any oil trading today and wait for next week. If this is a true move, then we need to see a test of the strong resistance above, and a breakout out in due course. If it is false (as I suspect) then we will see a continuation of a move lower following the bearish signals and break below all three moving averages of Wednesday. Overall crude oil closed the session at $66.94 per barrel, trading between a high of $67.29 and a low of $62.76. Have a great weekend!
The short term is bearish, medium term sideways, long term bullish.
WTI:
Support: $65.48 (low of 03/07/09) Resistance: $68.85 (high of 28/07/09)
Support: $64.74 (low of 29/05/09) Resistance: $68.68 (high of 01/06/09)
Support: $64.38 (low of 23/07/09) Resistance: $68.22 (high of 24/07/09)
OIL (BRENT):
Support: $69.07 (low of 28/07/09) Resistance: $ 71.96 (high of 19/06/09)
Support: $68.69 (low of 24/07/09) Resistance: $ 71.36 (high of 28/07/09)
Support: $68.10 (low of 29/06/09) Resistance: $ 71.20 (high of 10/06/09)
