Crude Oil Weekly Forecast December 19-23, 2011, Fundamental Analysis

Crude oil prices declined last, as the U.S. dollar strengthened on mounting fears the European debt crisis is worsening, after the market saw the ECB and the EU summit nothing but a major disappointment and rating agencies continued to add their negative imputes to the abysmal equation..

Over the week, economic data from the United States basically showed better than expected economic progress, where the manufacturing sector activities continued to expand in December, while this week our eyes will be on market movements rather than the data as this is the last week before Christmas and the end of the week and position squaring and closing the books will be evident as traders step aside ahead of the New Year and that will be the main focus.

We need to track the debt sales this week as well with eyes on Italy, France, Greece and Portugal as the yields and demand will be closely observed. The euro area lacks major fundamentals yet the debt crisis developments and any comments from leaders will be watched and the Italian Senates are expected to follow the lower house of Parliament vote and also okay Monti’s 30 billion austerity package this week.

As for the United States the data is heavy housing data alongside the GDP and income report. The data will add to the volatility in the market, especially if the data worsens and adds to fears of slowing global growth yet good data might help in easing the strain on markets that are preparing for the holidays ahead.

Our overall outlook for crude oil prices is somewhat neutral with a downside tendency, as the outlook for global growth is worsening due to mounting concerns from Europe and the fact that major economies around the globe are still weak, and that should put negative pressure on crude oil prices. Nonetheless, if the outlook for global growth improves, crude oil prices are likely to rise in that case.

Other news from the euro area and the U.S. economy to affect the pair this week:

Monday December 19:

We don’t have news from the United States, and accordingly, traders will be focused on the developments from Europe.

Tuesday December 20:

The United States will start the day at 13:30 GMT with the November housing starts which are expected with 0.3% rebound to 630 thousand from 628 thousand. Building permits are expected to drop 1.8% to 633 thousand from 653 thousand.

Wednesday December 21:

At 15:00 GMT the US Existing Home Sales for November are due and expected with 2.2% rise to 5.06 million from 4.97 million.

At 15:30 GMT, the EIA report for crude oil inventories will be released for the week ending December 16, where last week crude oil inventories decreased by 1.9 million barrels.

Thursday December 22:

The United States will start the busy day at 13:30 GMT with the final and third revision for the third quarter GDP as the expansion is expected unrevised at 2.0%. Personal consumption is expected to hold at 2.3% and the Core PCE to remain at 2.0%.

The Jobless Claims are due the same time after the unexpected huge drop in the past week to 366 the lowest in three and a half years.

The University of Michigan Confidence final estimate for December is due at 14:55 GMT and expected with an upside revision to 68.0 from 67.7.

The leading indicators for November will be released at 13:00 GMT and expected to ease to 0.3% from 0.9%.

Friday December 23:

The week will end with the United States as well starting with the Durable Goods Orders at 13:30 GMT which is expected with 2.1% rebound in November after 0.7% drop and excluding transportation it’s expected to rise by 0.4% after 0.7% gain.

The November Income Report is also due at 13:30 GMT with the Personal Income expected with 0.3% rise after 0.4% and personal spending expected to rise 0.3% after 0.1% as for the core PCE it is expected to hold at the previous gains with 0.1% rise on the month and 1.7% on the year.

New Home Sales for November will be released at 13:00 GMT which is expected with 2.0% rise after 1.3% gain to 313 thousand.