Black gold rising to the top? (page 2 of 2)

The market is preparing for the driving season and the hurricane season in the US. The North Atlantic hurricane season runs from June to November and has produced an average of 12.5 storms annually since 1990. Hurricanes Katrina and Rita struck the Gulf of Mexico during the record 2005 season and caused $17bn worth of damage to oil and gas pipelines, production platforms and refineries. Prices usually peak this time of year and there has been a major shift in sentiment in recent weeks, with investors paying less of a premium to hold later dated oil contracts. In other words, in case hurricanes cause less damage than expected, this risk premium will diminish, resulting in lower future prices.

Oil to all time high?

The question is if WTI oil reaches an all time high of around $80 again. Nobody can look into the future so it is difficult to tell. What we can do is to take a look at the technical situation of WTI. Supported by the fundamentals, WTI could try to attack that level again. With a current price of $69.2, WTI is trading near a short term resistance level. A pull back to around $64 and $66 is possible and if this level stands firm and holds, a new rally could be unleashed; provided that the resistance at $70 is taken out, the way is clear to $80. The situation will turn negative, however, if WTI sinks below $64. Besides looking at charts, it is also highly advisable to watch weather forecasts as well.