NewsWTI crude oil consolidating gains around $102
AnalysisWTI Crude Oil futures for December settlement consolidated on the gains recorded yesterday as the contract holds around $102 per barrel with slight movement since morning. Crude is still holding on the upside momentum from yesterday drop in inventories and Seaway news yet Europe’s woes are weighing still on the sentiment this morning.

Crude oil futures are currently hovering around $102.65 per barrel nearly flat rising 0.06% and recorded the high of $102.84 and the low of $101.62 per barrel.  

The market is still mixed and the sentiment is shaky, yet surely that did not prevent oil from leading the gains despite the wide losses across the board. The recent European agony has not much dampened crude oil as it still managed to extend the gains and land above $100 mark for now, supported by good macroeconomic data from consuming nations and prospects for demand, nevertheless, the challenging outlook remains a reality and that might soon return to haunt crude oil traders.

For now, the incoming data for crude is bullish. The upside rally yesterday was triggered on news of reversing the Seaway pipeline which will now provide the connection from central US and Canada to the coast of the Gulf of Mexico and that was good news for now since it is seen to increase the supply of WTI crude and accordingly increase its competitive advantage and minimize its spread and with the ICE Brent around $111 a barrel then the automatic reaction was for oil to surge to the upside.

The spread between the WTI Oil and ICE Brent dropped 12 cents to $8.99 to the advantage of Brent of course, yet remains the least since March 08 and is lower by 67% from the record $27.88 set on October.

More support was from the reported drop in the U.S. commercial crude inventories and also distillate fuel inventories that include heating oil, which is the focus in the winter season, and that helped crude build on the gains.

We surely see that the rise is challenging at this time of crisis in the market, when the losses are spreading across the board, the dollar is on the rise, and fears of a deep economic relapse are clearly materializing, and that is all the longer lasting bearish effect on crude. As long as the resilient upside momentum seems now we still see the chance for it to extend yet surely not here to stay.

Europe today is focused on new bond auctions with France and Spain getting ready to access markets at again rising costs. The yields are still rising threatening Spain and France to join Italy in the ring of fire and the ECB bulk buying did little so far to calm the market that insists to deepen the crisis which reflects the clear lack of confidence that Europe can handle its crisis.

The contagion risk, recession fear, and global financial tension are all downside pressures on the market that crude for now is resisting with the steady performance in its leading consuming nations. The U.S., China and Japan have all provided better than expected data supporting the current status for demand, yet will that picture remain untarnished with the spread of the debt crisis, especially after the OECD said no major economy will be able to escape a slowdown.

Choppy and volatile trading will remain evident and although the overall outlook for crude remains more biased to the downside for now the chances for resuming the upside move are still there with $104.70-80 areas the next barrier!