After a sharp drop, it looks like oil prices have managed to find a short-term floor. Again we are modestly bearish on oil prices because the state of the global economy isn’t conduce to higher oil prices. People aren’t driving as much and industries aren’t refining as much as the black gold. Prices appear to be holding decent support around $90.00, a break below this should lead to a test of support at $87.50. On the upside we think prices should hit resistance at $95.00.
Oil prices were the biggest moves last week as prices broke down. As we pointed out, we have been fairly bearish on oil because the high prices just didn’t make sense. The economy remains extremely and there is a massive supply of oil as demonstrated in last week’s inventory report. The sell-off started on Monday and continued through the rest of the week eventually hitting a low of 90.96 on Thursday. Prices ended the week modestly higher 92.89. For now we think 95.00 will act as resistance in the near-term.
As expected, it looks like oil prices are hitting a brick wall at $100. As we have said before, because of the current state of the market, we don’t think prices have enough momentum to break resistance at $100. We could see prices fall to test support at 97.51 in the near-term.
As expected oil prices are struggling to make new gains. Looking at the weekly chart we can see that prices have closed the last three weeks in relatively neutral territory. These doji patterns are an indication that prices have found an equilibrium. In the near-term, as the economy remains fragile, prices should not break above $100. Look for prices to swing in a fairly wide range with major support at $93.00 and resistance at $100.
Oil futures appear to be entering a new consolidation period, which is not surprising. Investors will be reluctant to push prices past $100 in the near-term. The economy is still extremely fragile and high energy prices could push it back into a recession. For now, $98.29, which was the recent high on Aug. 23, should hold as resistance. On the downside price could fall to a low of $94.00 before finding some support.
Oil prices have made some strong gains in the last few weeks, so we weren’t surprised to see some consolidation last week. Last week prices hit a high of 98.29 but the selling pressure caused the price to close at 96.15, which was below our initial resistance point at 96.50. Because of recent momentum the price traders should keep their eye on is $100. This is a strong psychological area that could generate strong selling pressure.
Because the economy isn’t falling off a cliff, demand for oil is starting to improve. Unfortunately this is a double edge sword. If oil jumps too quickly it could damage the current fragile economic recovery. On Friday prices closed at $96.04. There is enough room for prices to run to $96.50, which is the next major resistance point. On the downside there should be initial support around $93.50.
Oil prices started the week strong with big pushes on Tuesday and Wednesday; however, we have pointed out that 95.00 will act as a strong resistance area. After hitting a session high of 94.72 on Wednesday, prices fell into a consolidation pattern and ended the week relatively flat at 92.87. In these current market conditions, which most central banks lowering their growth forecasts, we don’t expect to see a sustainable long-term rally in oil anytime soon.
Oil futures started the week on a very soft note. Concerns that the global economy will continue to weaken have hurt the demand outlook for oil and during last week’s first session prices closed at $88.14 and spent the rest of the week trying to play catch up. Although oil closed the last four sessions in positive territory, it was unable to reclaim all the lost territory from Monday’s sell-off. Priced closed the week at $90.13, however we think that prices could continue to struggle in the near-term. For now, investors should watch initial resistance at 91.50 and then the recent high of 93.25, which should cap all major advances in the near-term. On the Downside, prices should find good support around $88.00.
Although we are bearish on oil prices in the near-term we can’t ignore the recent price action. Since July 10, oil has made some major gains and did not have a negative close until July 20. On July 19 price hit a high of 93.25. There was some modest profit taking to end the week, which is not surprising and prices ended the week at 91.83. We are expecting the selling pressure to continue to build as investors worry about low demand in the near-term.