Finally, the developing world, particularly China, is still a concern as runaway inflation continues to be a problem despite actions already taken.
"The big wild card is China and the entire developing world market," Chirichella says. "If we take oil demand growth over the last couple of years, about 80%-90% of the demand growth has been attributed to emerging markets with China being the leader of the pack."
Largely, Chinese growth had been viewed as one of the few bright spots in a struggling global economy. As that growth has gone parabolic with double digit gains, the People’s Bank of China has shifted into inflation-fighting mode, already raising interest rates twice as well as raising bank reserve requirements twice in November alone.
"With China getting more aggressive about fighting inflation, China will play less of a role in the commodity rally and that means the commodity rally will be less pronounced," Chirichella says.
Flynn adds, "China is going to be a big story. Will they be able to raise their interest rates or will their inflation continue and create bubbles that could pop and slow the entire global economic recovery?"
Crude oil ended 2010 with momentum that quickly turned into volatile trading days. "There was a lot of upward moment going into 2010, too. You’ll see that at the end of  and it really didn’t follow through because of all the crises that awaited us. We could be in for a similar situation this year," Flynn says.
Much of crude’s strength last year came from bailouts following crises that may not be resolved, so analysts are focusing on areas like Europe and China.
Chirichella expects crude to trade between $80-$100 a barrel for most of 2011, but it may reach $105 if $100 is breached. Kurzatkowski also sees resistance at $100 and $110 if that is breached., adding the last time oil prices were that high they went parabolic and did not create many resistance levels. He places support at $85 and if breached, $70. Flynn places oil in a range of $75-$95 for most of the year.
Natural gas continues to be a very different story, mostly because supplies continue to be plentiful because of shale gas.
"The shale gas revolution goes on. It has changed the world and thrown out the rulebook for the ratios between natural gas and crude oil," Flynn says. "Production of natural gas is cheap, it’s really going to be plentiful and even as the economy improves, the demand for gas is going to keep the market only somewhat supported."
Chirichella agrees with that assessment. "I don’t see any signs that the drilling is going to stop or that supply will outstrip demand. Once the cold weather goes away, we’re going to find inventories after the winter heating season will be above their average levels," he says.
Natural gas does have some positives going for it, though they may take a while to materialize. Chief among them is the use of natural gas as a major alternative fuel source as proposed in T. Boone Pickens’ plan for American energy. And this belief (see Cover Story) has kept drilling ongoing despite depressed prices, as no one wants to be left out
"Barring a hurricane in the Gulf or the government adopting the Pickens Plan, natural gas will continue to be traded on a short-term basis and be driven by short-term weather conditions," Chirichella says.
For now, though, natural gas is expected to stay in a fairly narrow range for much of 2011. Chirichella sees downside support at $3.75 with a distant ceiling at $5. Kurzatkowski expects support around $4 with more at $3.75 and resistance at $4.50. Flynn sees a potential low of $2.50 and the upside to $5.50, but most of the year spent below $5.
We have seen some destocking on the supply side, but heating oil stocks are still about 20 million barrels above the five-year average for this time. As usual, weather forecasts are the thing to watch.
"There have been some weather concerns in Eastern Europe, where they still use heating oil," Kurzatkowski says. "They’ve had a pretty cold winter and that can be supportive of energy prices as a whole. The last few years Europe has really taken the brunt of the cold winter weather."
Chirichella sees heating oil staying in a band of $2.20-$3 per gallon for much of the year. Kurzatkowski expects support at $2.315 and more at $2 with resistance first at $2.715 and then at $3. Flynn expects supplies to stay plentiful and price to stay in a range of $2-$2.60, with most of the year closer to $2.10.
While RBOB gasoline futures rallied to yearly highs at the of 2010, much of those gains were because of a French refinery strike that limited delivery to the eastern shore of the United States. For 2011, watch economic reports, particularly employment, to judge the state of economic recovery.
"Gasoline is going to be directly related to unemployment. If companies start to hire again, we could see gasoline [rise] quicker than it has been," Chirichella says. "Gasoline will be more related to the unemployment story than other commodities in the energy sector."
Chirichella sees RBOB gasoline support at $2.10 per gallon and resistance at $3. Kurzatkowski expects support at $2.20 and $1.85 with resistance at $2.40, $2.70 and $3. Flynn expects prices to remain between $2.20 and $2.40 for most of the year, but they could get up to $2.70 and as low as $1.90 he says.
For much of 2010 energy prices reacted to central banks putting out economic fires. While a solid recovery and sovereign solvency still may be a bit too much to ask for in 2011, a return to stability seems to be on everybody’s mind, whether that is slow and steady growth in Europe or a cooling of parabolic growth in China.
Moving forward, growth and demand may be the most important factors to watch. "The biggest threat to demand is that we have another sovereign debt crisis that we can’t handle," Flynn says.
A bigger question may be how high can prices go if we do see a robust recovery?