Light Sweet Crude markets fell for the week as the Iranian situation seems to be calming down just a bit. The Western powers have seemed to “blink” in the situation, and haven’t decided to embargo the oil and central bank of Iran just yet. In fact, there is a lot of talk about the embargo being in 6 months or so, and there are already loopholes that are being drilled into the idea.
With that being said, supply disruption isn’t as likely, and the flow of oil should continue. Also, weaker than expected economic data over the course of the week will also suggest that oil demand might be down in the near future globally, and this would more than likely increase supply as the demand simply rolls over.
The recent action in the market has been a bit choppy, and we have found the $105 level to be very resistive. The level is crucial as far as resistance going forward. If we can close above it on the daily or weekly chart, this contract should go much higher, and $115 would almost be a given at that point. The $95 level is the nearest support level under the market, and we think that it is very likely that the consolidation should continue.
The various problems that we are seeing both geopolitically and economically could continue to give the market a hard time to gain serious traction, and many analysts believe that the demand for oil is far weaker than the market seems to want to believe. The prices simply aren’t reflecting the true fundamental demand in their eyes.
The weekly candle is an bearish candle, so a break below the bottom would be a bearish signal and would show strong resistance. The breaking of that level would more than likely have us seeing $95 in a blink, and a break below that sees $90 and $80 going further. The range is that the market needs to get out of again is the $105 and the bottom of the week’s lows. The short-term could be very choppy, so we believe that the long-term investor might be better served to wait at this moment in order for the markets to make up their minds.
Oil Forecast for the Week of January 16, 2012, Technical Analysis
Originally posted here
