The Energy Space
Energy Price Outlook
And so the bullish trade returns. The up-down-up-down pattern that has developed over the past week continued yesterday in WTI and cast a positive light on an otherwise neutral-appearing chart. Brent appears similar, but couldn't get much of a rally going yesterday. The market will still receive support from improved economic data in China and Europe, general weakness in the dollar, accommodative Fed policy, and recent production declines in Saudi Arabia. Those declines can also be interpreted as negative at the same time, because they add to OPEC spare capacity. Yesterday's surprise drop in oil inventories were positive but should be only temporary, as inventories tend to gain through the first five months of the year. Negatives are still in place from uncertainty over the U.S. debt ceiling and from Tuesday's report of weak 2012 German GDP. The bottom line between these ups and downs is that the market has almost gone nowhere in Brent and slightly higher in WTI in recent weeks. Expecting that trend to continue may be the best assumption going forward. We favor holding our June WTI-Brent trade entered on Jan 4th at -$14.25 with a target at -$8.00. In the event of a selloff in WTI, we would look for a rebound after a test of the $91.50 level. We would also anticipate a shrinking of the WTI futures contango....1514 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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