Crude Oil Reaches New 26-Month High on Supply Issues Crude Oil (WTI) – $91.14 // $0.03 // 0.03% Commentary: Crude oil rallied strongly for a second day on Tuesday due to the same factors that influenced trading in the day before. WTI added $1.86, or 2.08%, to settle at $91.11, while Brent advanced $1.91, or 2%, to settle at $97.61, a new 26-month high. Production in Alaska still remains shut-in due to a pipeline leak, but the latest news is that flows may be soon restarted (at least temporarily) to prevent freezing in the line. In any event, this whole event will may lead to several million barrels of lost production, but will likely have no major, lasting impact. There is always the risk that production stays offline longer than expected though, so until the situation is completely resolved, oil may stay well-bid. Incidentally, there was a temporary outage at a Gulf of Mexico production platform operated by Chevron on Tuesday, but production there was quickly restored. In the bigger picture, crude oil continues to benefit from robust growth in the global economy and uncertainty with regard to non-OPEC supply. As long as OPEC keeps production restrained as it has been doing, prices will be responsive to these supply disruptions. Nevertheless, at nearly $98, the price has already accounted for many of these bullish factors. The commodity may have difficulty moving into the triple digits until there is more clarity on the outlook for this year’s supply and demand balances. Tomorrow will bring the DOE report on U.S. petroleum inventories. The API report which is released a day ahead was decidedly bearish, with the industry source reporting a 50K build in crude stocks, a 7 million barrel build in crude stocks, and a 1.6 million barrel build in distillate stocks. Technical Outlook: Prices have rebounded above resistance at $89.63, the 23.6% Fibonacci retracement of the 11/17/10-1/3/11 rally. From here, the bulls target a retest of January’s swing top at $92.58, a level reinforced by support-turned-resistance at rising trend line set from the swing bottom in November. The 23.6% Fib has been recast as near-term support.

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