Oil Chart 17 Dec 2010

Following two weeks of sideways consolidation with today’s candle on the oil chart adding to the recent pattern, the only question that remains is whether the explosive break out for oil prices to the upside occurs before the end of the year or in 2011 – but make no mistake crude oil prices are heading higher – and the more prices consolidate the bigger the move.  In the short to medium term the current consolidation may be sufficient to propel crude oil through the $100 per barrel price handle, but only time will tell.  From a technical perspective all four moving averages are pointing sharply higher with both the 9 and 14 day providing strong support in the event of any minor pullbacks and over the last three days we have seen a series of higher lows to the downside, always a strong signal that a breakout is imminent.  The 40 day moving average is also now moving firmly higher and with the 200 day also inclining upwards this is also giving us a further confirmatory signal of the bullish mood for oil.  Immediately below we have several strong platforms of support, not least in the $84 per barrel region along with a secondary level in the $87 per barrel area.  From a fundamental perspective the prolonged cold weather which is now affecting much of the northern hemisphere is helping to fuel higher energy prices along with this week’s oil inventory stats which surprised the market coming in with a large draw of -9.9m barrels, against a forecast of -2.7m barrels.  Sadly I cannot confirm when the $100 per barrel price point is likely to be achieved, but rest assured it will get there, and from there in the longer term I fully expect to see a re-test of the all the time high of $147.27.

The Economic Impact of 0 oil

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