EOX Daily Energy
Energy Price Outlook
The oil market traded nicely higher yesterday, but it’s tough to ignore the possibility that WTI has difficulty once again with the 50-day MA at $93.85. The third test in the last three weeks is currently underway and could hold WTI, while at the same time, Brent is moving further above its 50-day average. Widening differentials between Brent & WTI continued again yesterday, as Brent focused more on production issues in the North Sea and tensions in the Middle East, while WTI was underperformed due to higher U.S. production, Wednesday’s monthly EIA report, and signs of economic weakness. Seasonal patterns turn negative in WTI today and remain so through Dec 7th (chart). We think that fundamentals argue for WTI to break below $87.70/bbl support in the near-term, however, it’s difficult to argue with upside momentum taking place in Brent. Chinese trade data is on the calendar for either before or after today’s close.
Oil prices followed Wednesday’s selloff by reversing to the upside, and WTI ended higher by $0.82 and Brent by $1.38. It was a relatively quiet session, with most of the strength as well as most of the activity taking place in the first half of the day. The initial claims numbers set the stage for a move higher with a drop of 30K reported, although they were pushed lower mostly in one state and possibly due to re-certifications. Support was also offered by a higher euro, which rallied on expectations for a debt extension in Greece. In Spain, the country is deadlocked between those that want it to activate the OMT such as France and the EC, and those that believe it’s not needed such as Germany.