Commentary: Crude oil is up to kick off the new week, as the commodity stays firmly inside its recent $87 to $90 consolidation range. Last week crude was essentially flat, at least when looking at WTI, the U.S. benchmark. As we wrote about last week, WTI remains depressed due to a persistent glut at the NYMEX delivery point, Cushing, Oklahoma. We saw UK Brent rally about $1 to nearly $92, while LLS gained about $0.60 to $93.50. As we get the typical winter draw in crude stocks (specifically at Cushing), we should see those spreads tighten and WTI may then join the other crudes in the $90’s. But even if spreads remain wide, oil in general remains supported by bullish fundamentals with triple digit pricing now a distinct possibility for 2011. The two factors that will determine how high crude goes are OPEC supply and global demand growth. The IEA expects growth of 1.4 million barrels per day next year, but keep in mind that their initial projections for growth for this year were way off and were subsequently revised higher.
Technical Outlook: Prices continue toconsolidate between $86.67 and $89.20, the 38.2% and 14.6% Fibonacci retracements of the 11/17-12/7 upswing, respectively. A break below current support exposes the 50% Fib at $85.41. Alternatively, a push higher targets December’s swing high at $90.76.
