WTI Light Sweet Crude 21 Oct 2010

The December crude oil futures contract traded sharply higher yesterday as it recovered from an unexpected bout of dollar strength triggered by the Chinese interest rate rise which sent commodities in general, and oil in particular sharply lower.  The crude oil trading session yesterday ended with a wide spread up candle which just failed to breach the 9 and 14 day moving average suggesting that these may be presenting an obstacle to the short term recovery for crude oil and indeed in today’s crude oil trading session they have exerted a degree of pressure with the December contract trading lower at 80.68, down 1.86 from a high of 82.70.  As such we are now trading in a range between the 9 and 14 averages above and the 40 day moving average below which currently sits at 79.42.  From a technical perspective for any continuation of the bullish momentum of September and early October, we need to see crude oil futures break above the 85 high of earlier in the month, with an initial hold above the short term moving averages.  Should both these technical factors be achieved then this will provide the requisite platform for the next leg up in the bullish trend with a move higher to re-test the 92 per barrel region in due course and from there to test the 100 per barrel and beyond, which is expected to be achieved for the commodity within the next 6 months.

Crude oil futures moved firmly higher in yesterday’s trading session ending as a wide spread up candle which broke back above the 9 day moving average once again following several days of sideways price consolidation after the strong breakout of late September.  The December crude oil futures contract closed marginally below the $84 per barrel region which has subsequently been breached in early trading today, with the commodity continuing to climb having touched an intra day high of $84.80, before pulling back to trade at $84.19 per barrel at time of writing.  As such the trend for crude oil futures remains firmly bullish as we now approach the key $85 per barrel region where we saw the futures contract pull back late last week.  Any breach here will open the way for a run towards $86.40 per barrel and beyond and thereafter through $88.20 and on towards the $92 per barrel region last seen in May of this year.

This afternoon’s crude oil inventory figures are forecast to come in a draw from last week’s +3.1m down to 1.5m and if achieved should help to propel crude oil futures as a result.  In addition the weak dollar is also adding its own brand of support.  Our longer term outlook still remains $100 per barrel & beyond in Q1 next year.

Top Oil Trader will fall short of $100