Commentary: Crude oil fell $0.51, or 0.56%, to settle at $91 after China raised interest rates for the second time since 2007 this past weekend. U.S. equity markets also sold off initially, but then proceeded to recover all of their losses to close at a new 2-year high. At the moment, risk assets can be best described as ‘drifting higher’ as prices respond to an extremely favorable backdrop of low interest rates and accelerating economic growth. The opportunity for corrections in 2011 will take place when this bullish paradigm is upset in some way. Already we have seen interest rates on the long end make a leg higher. If they make another such move, say, the 10-year Treasury at 4-5%, we may see some impact on equities and crude. Then there is the prospect of potentially many more rate hikes from China. If growth in the world’s second largest economy slows more than expected, that will have a tremendous impact on crude. Until then, however, the trend is decisively higher. Technical Outlook: Prices are showing a bearish Harami candlestick pattern below resistance at the upper boundary of a rising channel set from August (now at $92.37). A move lower from here sees initial support at $89.87.

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