Crude oil prices topped $82.00 last week for the first time since Jan 11 as the market trended higher throughout the week after initially dropping to $78.00 on Monday. April crude oil rounded off the week up more than 2% closing at $81.50. The advance in oil was led by dollar weakness, strong equities and improving economic data as well as new fund buying to start off the new month. Among the economic reports last week was the MSCI Emerging Markets Index which climbed to five week highs after India’s economy improved, and the U.S jobs data. The nations unemployment rate remained steady at 9.7% as the economy shed only 36,000 jobs in February compared to the 90,000 analysts had projected.
The weekly inventory report also supported oil prices last week based on the refinery utilaztion component. Crude inventories increased 4.1 million barrels and gasoline stockpiles rose 700,000, both much higher than expectations, but refiners ramped up operations by 0.7% to it highest level in five weeks at 81.9% of capacity on expected demand increases. Supplies of distallites were in line with estimates, falling 900,000 barrels.
The supply and demand fundamentals remain bearish, yet the investors are continuing to look for signs the global recovery will sustain. According to the CFTC, speculative net-long positions rose 7.1% to 91,417 contracts for the week ended March 2. Hedge-fund managers and other large speculators are betting on another weekly increase in oil prices.
Technical Outlook
The market is in a 5-week uptrend channel with prices settling above $80.00 for the first time on a weekly basis since the first week of 2010 setting a Bull bias to start things off. Support this week is expected to be found in the $81.50 to 80.00 range with any corrective pullbacks offering buying opportunities. If the weekly support range holds, or if trade surpasses and posts daily settlements above $82.00, trade will be positioned to challenge previous highs at this year’s spot high of $83.95 up to the April contract’s year high at $85.00. The $83.95-85.00 range is our weekly Resistance target range where longs should begin to scale out of positions as we aniticipate sell orders to be placed in that range. Settlements above the upper 6-month and 23-week trend channels at $85.25 will pave the way to $87.00 while bringing the 50% retracement level of the 2008 bear market at $90.00 in range for this month.
On the downside, sellers can either act impulsively on failures to take out last week’s $82.07 high for a corrective selling wave into the weekly Support range at $81.50-80.00, or can wait for stalling momentum inside the $83.95-85.00 range for shorting opportunities. With the underlying technical conditions bullish this week, shorts in these areas should be on a scalping basis. The bearish turnover for the week is placed below $80.00. Trade or settlements below $80.00 are needed to rekindle bear market forces for a test down against last week’s March low at $78.05 with charts showing room down to $77.00 on heavy momentum. A close for the week below $77.00 calls for sell offs in the coming week’s targeting $75.00 down to $72.50.
