|Analysis||We are trading the last day away of hectic 2009, which was very volatile for oil indeed. Crude is on its way to end this year with further gains around $80 a barrel and earning the volatile year the crow of the strongest year of gains in about a decade!|
Yes indeed it is, the year started with the set bottom for the slump that hit the energy commodity after setting the all-time high in July 2008 above $147 to hit the lowest in January this year at around $32 a barrel as the recession suffocated demand and hit the globe.
Nevertheless, the year progressed and so did confidence and expectations as the recession gradually started receding supporting demand for crude, and in the latter months of the year we started to witness further signs of stability especially with major industrial nations like Japan, Germany and the United States starting to emerge from their recession.
Oil settled around its highest in five weeks yesterday after continued signs of support from the economic recovery helped the black gold sustain its gains. Contracts for February settlement ended yesterday at $79.29 rising by 41 cents after setting the high of $79.80.
The gains for crude were supported by the U.S economy yet once again, where the Chicago business barometer yesterday rose to the highest since 2006 supporting the fact that demand is rising and businesses run their factories and start to stock inventories that have dried amid the recession as they adjusted their operations.
The strengthening demand was confirmed further with the fourth consecutive weekly drop in commercial crude inventories. The EIA reported yesterday a drop of 1.54 million barrels in crude stockpiles alongside a drop in gasoline and distillate fuel supplies.
Receding recession and the exiting of the demand rout that has hit the globe helped oil rebound from its early year lows to set the highest of $82 a barrel in October and ending the year around its highest. The year is about to end when oil averaged $62 a barrel and to exodus this year with the strongest gains since 1999 with about 80%!
The gains are expected to continue into the coming year with average expectations for oil to return to the three digit area and average around $80-85 a barrel! The rise in demand and geopolitical tensions are expected to have their say, which resemble the past two weeks for crude.
Protests and tension in Iran has supported the continued rise in crude prices as fears that the tension will disturb supplies from OPEC’s second largest producer. Protests are still rumbling across the Iranian capital which already caused high casualties, deaths and detained above 1,000 which Iran blames the west on fueling!
Hours separate us from the end, and we see that we are very likely to witness a closing at $80 areas! Crude contracts opened today with upside bias trading around $79.70 as of 8:45 GMT higher by almost 40 cents after opening at $79.28. We are likely to witness the $80 areas amid thin-volume trade today which is to end the year and who knows we might just reach the year’s high set in October…
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