Crude Oil Forecast December 26, 2012, Technical Analysis

Light Sweet Crude

The light sweet crude markets fell slightly during the abbreviated Christmas Eve session on Monday in order to close at the $88.50 level. In a session like this, it’s fairly difficult to garner any type of new information beyond the overall pattern of the markets themselves. This Monday was no different, as we see a fair amount resistance once we get up to the $90.00 level, and support down near the $86.00 level as well, probably extending down to $85.

Overall, this market looks like it’s continuing the consolidation that we’ve seen over the last two months or so, and as a result we think that it will continue to be range bound in the above-mentioned area. We do not see any catalysts for breakout at this moment in time, but of course headline shocks can come at any moment. Demand is very low right now, and as a result light sweet crude is probably still a bit overvalued. With this in mind, we do prefer selling over buying while were in this range. 

Brent

The Brent markets fell as well, but tried to rally in order to fill the slight gap that was formed at the open. The market looks like it is doing much the same thing as the light sweet crude, simply consolidating. However, in this market we have the upper part of the range at the $112 level, with the 105 levels dollar been the bottom. Also, one thing about Brent crude that’s a bit different is the fact that it is much more sensitive to headlines coming out of the Middle East. With the various problems that we’ve seen in that region this year, it really wouldn’t take much to get some type of panic buying in this marketplace.

With that being said, if we are going to buy either contract in the oil markets, it will be this one. Overall though, we still feel that there is a bearish bias in general, so because of this we would need to see an actual catalyst to push prices higher.