On Friday, crude oil (NYMEX:CLM14) gained 0.61% as strong U.S. economic data and ongoing worries over the crisis in Ukraine weighted on the price. Thanks to these circumstances, light crude came back above $102, but does this growth change the short-term outlook for the commodity?
On Friday, better-than-expected numbers from the housing sector gave crude oil a support. The Census Bureau reported that U.S. building permits rose 8% to 1.080 million units last month (while analysts had expected an increase to 1.010 million units in April) and the Commerce Department showed that U.S. housing starts rose 13.2% last month to 1.072 million units, beating expectations of 980,000 gain (it was the largest increase in five months).
The commodity was also supported by heightened tensions between Russia and Ukraine as Russia informed the EU that it would stop natural-gas deliveries to Ukraine on June 1 unless it receives payments for past-due amounts. Ukraine said it is preparing to pay $4 billion to Gazprom but hopes to negotiate lower prices. These events fueled worries about the potential supply interruptions from the region and pushed the price of light crude to over $102 per barrel once again.
Will we see the commodity higher in the coming days? Let’s check the technical picture of crude oil (charts courtesy of http://stockcharts.com).
Although crude oil gained 2.11% in the previous week, the medium-term situation hasn’t changed much as the commodity still remains below both medium-term resistance lines. Therefore, what we wrote in our last Oil Trading Alert is up-to-date:
(…) we remain convinced that as long as this strong resisrance lines remain in play further deterioration is still likely. (…) from this perspective, the recent upward move seems to be nothing more than a veryfication of the breakdown. If this is the case, the bearish scenario (…) will be in play:
(…) if the commodity extends losses (…), we will likely see further deterioration and a drop even to around $95, where the medium-term support line (based on the June 2012 and January 2014 lows) is.
Next Page: Short-term outlook.