Crude Oil Prices January 2, 2013, Technical Analysis

Light Sweet Crude

The light sweet crude markets rose during the session on Monday as the light volume provided a thin enough market to have the futures move on very little news. There were suggestions that some of the fiscal talks in the United States started to make headway, and as a result there was a little bit of a “risk on” rally towards the afternoon in the United States. However, nothing set in stone and technically the US will fall off the “fiscal cliff” at midnight January 1, 2013.

Having said that, there are still several things to discuss between members of Congress in order to finalize the deal. President Obama came out and suggested that during the upcoming debt ceiling talks, there could be more taxes. Because of this there is a possibility that the markets may selloff in the near future. After all, the prospect of even higher taxes certainly does nothing for an economy.

Brent

Brent markets rose a bit during the session as well, but they still remain constrained in the area of $111. Because of this, we feel that this market is trying to break higher, but is still facing significant resistance at the $112.00 level. With this being said, we think that there is pressure building to the upside, but unless we see some type of economic growth or positive momentum for the world economy in general, we think the rallies will eventually fail in this market.

Even a close above $112.00 would only have a limited life as far as we can tell. Granted, we could go as high as $116.00 in the near-term, but we think eventually that level will hold and keep the market lower. As for rising oil prices, there simply no fundamental reason to think so at this moment as there are far too many slow economies out there. One of the biggest drivers of course would be the United States, but in reality that economy is doing reasonable, but there are many political risks at the moment and more to come. Because of this we would be very cautious going long of this market.