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If you think this oil rally is over, think again
Analysts expect more near-term gains for oil Crude-oil futures touched their highest levels of the year this week and they're not done climbing yet. Marking their highest settlements since December, West Texas Intermediate crude (CLM5), the U.S. benchmark, finished Thursday (http://www.marketwatch.com/story/rising-stockpiles-china-data-temper-gains-for-oil-2015-04-23) at $57.74 a barrel on the New York Mercantile Exchange, while Brent crude , the European benchmark, ended Friday at $65.28 a barrel. Tensions in the Middle East, particularly in Yemen and Saudi Arabia's involvement, have fueled concerns over supplies in the oil-rich region, giving oil prices a boost. Prices have also found some support from data Wednesday which showed a weekly decline in U.S. crude production (http:/ /ir.eia.gov/wpsr/overview.pdf). "We see near term momentum-driven upside potential from today's [Brent] price levels, but record U.S. inventory levels (highest in 80 years) are among several variables that could provide headwinds if and when prices get back up into the $ 70s," said Katrina Lamb, Head of Investment Strategy and Research at MV Financial. The Baker Hughes ( BHI) count for rigs actively drilling for oil (http://www.marketwatch.com/story/us-weekly-oil- natural-gas-rig-count-down-22-baker-hughes-2015-04-24) has fallen for 20 weeks in a row but have yet to result in a significant decrease in domestic output. "Crude-oil production in the U.S. has started to fall back a tad and this trend may continue for some time yet given the recent sharp falls in both the oil price and also rig counts," said Fawad Razaqzada, technical analyst at FOREX.com. This will represent a "drop in the ocean, for the oil market is likely to remain more amply supplied," he said in a note. Still, Razaqzada said the near-term outlook for WTI oil is bullish because key technical resistance levels have been broken. A "conclusive" break above $57.50 may target the "psychologically-important $60 handle next," he said. Key support to watch is at $55.75, the midweek low, and if prices fall below that level, that could pave the way for prices to the old resistance level of $54. |
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