Key Points
• Crude Oil is holding at the psychological $100.00 levels
• Gains likely to be capped at the top end of the near term bullish channel
Highlights
Crude oil for spot delivery closed at $100.06 a barrel on Friday, up 2.66 percent for the week and extending its gains to the fourth successive week. Oil opened flat last Monday and the gains were quickly erased with black gold settling almost a percent lower during the session, before rebounding in the second half of the week to close above $100.00 a barrel, for the first time since December last year.
Light, sweet crude for March delivery ended the week at $99.88 a barrel, up 2.45 percent for the week. The negative basis increased to 0.18 cents for the week compared to 0.03 cents, the earlier week. Crude oil inventories announced last Wednesday showed an increase of 440,000 barrels as on January 31st, less than the anticipated increase of 2.5 million barrels, according to the Energy Department.
The decrease in imports was attributed to bad weather and analysts were certain that imports would increase once weather conditions improved. Meanwhile, gasoline inventories rose by 550k during the same period after declining by more than 800k barrels the week earlier while distillate inventories declined by more than 2 million barrels after falling by more than 4 million the earlier week.
The Week Ahead
Technical View
Spot crude ended Monday’s session at $99.93 to a barrel, settling with losses of 0.13%. Prices earlier rose to $100.50, breaching the highs of the previous session, but failing to hold on to its gains above $100.00 a barrel. Crude oil is likely to face strong resistances at its December highs of $100.75, a break of which the gains could extend to $101.50- 102.00; the top end of the near term bullish channel. ONLY a close above $103.00, expect the rally to extend to $112.00- 115.00.
Crucial near term supports at $94.00- 98.00; the bottom end of the near term bullish channel, with trend lines connecting the lows of December of last year and January this year, where the downside for now, could be capped. For the week, expect prices to remain in the $94.00-103.00 range.
Strategy
Look to short March WTI Crude oil futures from prices ranging from $100.00- 102.00 and look to exit round $94.00- 96.00. Positions should however be reversed if prices break $103.00 for targets of $112.00- 115.00.
