|Analysis||Oil is hovering above $81 a barrel heading for the fourth weekly gain on optimism in markets after the vivid signs of recovery that appeared recently. Stocks bounced, earnings beat expectations, and the dollar dropped.|
Crude prices gained near 3.5% this week continuing its upside trend that started on September 28. However, prices ticked down yesterday on speculations OPEC will increase their production to keep it within $70 and $80 range. If prices continued its incline, OPEC may slash production during their coming meeting in December. On Thursday, the contract shed $0.18 closing at $81.19, while recording a high of $81.50 per barrel and a low of $79.86 per barrel.
The higher demand on oil from the U.S. appeared clear after the release of the EIA report on Wednesday. On the other hand, U.S. stocks inclined on better than expected earnings by large U.S. companies such as McDonalds. In Asia, stocks also closed in the green territory, where Nikkei Index closed at 0.15% gains.
Moreover, the U.S. dollar slipped yesterday after advancing against majors. Today, it soared slightly to 75.12 compared with the opening at 75.06 as seen by the dollar index which tracks the dollar movements versus a basket of major currencies. The dollar's slide is boosting demand on commodities which are now cheaper. Investors are buying oil as alternative investment; however, it is now overbought and therefore a downside correction is expected as well as an estimated profit taking after prices had reached the highest level this year.
Now, oil is traded at $81.17 recording a high of $81.75 and a low of $81.05. Oil is expected to face a resistance at $82.00, while gaining support at $75.00.