Every time crude oil appears to have topped off and a correction is in sight, it surges to another all-time high. In mid July a $10 correction was wiped away in just over 24 hours.
Carlos Cunningham, broker for Prudential-Bach, says the weaker European outlook and recently stabilizing dollar have translated into the $12 decline crude experienced in early July, a trend he expects to continue. “We think a top could be in place for the time being,” he says, adding that in August, resistance is $146 per barrel, with support at $128.
“We have had a rise in price that has been powered by growing open interest,” says Timothy P. Evans, energy analyst for Citi Futures Perspective. He says a weak dollar and poor returns in equities prompted allocations to commodities in general and crude oil in particular.
“What we don’t have is any particular fundamental tightness,” he says, adding that inventories are above the five-year average, and 1% demand growth doesn’t indicate demand-pull inflation. “The Middle East is unstable, but it’s hard to make the case that it is less stable than it was in 1980, when Iraq invaded Iran; and regrettably, Nigeria is a difficult place to do business, but it wasn’t that stable even when the British were in charge.” He expects crude to trade down to $110 per barrel in August as a layover towards $70.