Crude Falls Below $100 But Heads For Fourth Gain In Five Years

Crude oil fell below the $100 on the final trading session of 2013, and despite the prolonged sideways trading seen this year, crude is poised to end 2013 with the fourth annual increase in five years and the biggest yearly advance since 2010.

“I think we will see similar sideways trading in oil next year. Markets will be volatile, but prices will stay in range. Key factors for the market next year will be on the supply side and global economic growth”, said Ric Spooner from CMC Markets in Sydney.

Meanwhile, Brent ended 2013 flat on worries about a prolonged outage from Libya. According to Spooner crude may trade between $85 and $115 a barrel in 2014 while Brent may trade between $90 and $120 a barrel next year.

Factors that helped support oil prices this year were the growing unrest Iraq, the tensions between Iran and the West over Tehran`s nuclear program and the outages in Libya’s exports and unrest in South Sudan towards the end of the year.

Meanwhile, a weak demand outlook in industrialized nations including the US, the world’s largest oil consumer, and a slowdown in consumption in China, the world`s second-biggest oil consumer, were among the factors that weighed on oil prices.

“Further progress on improving relations with Iran, removal of more sanctions, unrests in Iraq and Libya restoring production capabilities are some of top issues for the market”, Spooner added.

Now, investors will be watching the latest developments in the US monetary policy amid growing believes the Federal Reserve will taper stimulus soon. This would suggest the world`s biggest economy is gaining steam, improving the outlook for oil demand.

Yet, the tapering could also reduce the dollar supply in the market pushing it higher, which will make the dollar-denominated assets such as oil more expensive for holders of other currencies, adding downside pressures on commodities.

Meanwhile, US crude stockpiles probably dropped by 2.9 million barrels last week, for a fifth week, as refineries operated at the highest rate in five months and energy companies pared inventories to reduce year-end taxes.

The Energy Information Administration will publish its data on January 3 due to the closure of the Federal Government on Wednesday for the New Year`s Day holiday. Meanwhile the American Petroleum Institute will release its data on Tuesday.

- WTI crude oil futures for February is trading around $99.16 a barrel after falling $0.13

- Brent futures for February settlement is trading around $111.10 a barrel after falling $0.09

- Natural gas is trading at $4.41 per cubic feet after falling 0.38%

- Gasoline is trading at $2.7914 per cubic feet after rising 0.13%

- Heating oil (diesel) is trading at $3.0772 a gallon being unchanged