Crude Oil Weekly Forecast January 2-6, 2012, Fundamental Analysis

Crude oil prices declined last week, as the EIA report showed crude oil inventories rose last week by 3.9 million barrels opposite to expectations, which provided the oil prices with more downside momentum last week.

We started from last week to see the thin holiday volume with the choppy trading evident, where the eyes were on the ECB three year loans which flooded banks with 489 billion euros and the market still has a cautious reaction to it.

Moreover, European leaders failed to quell jitters and provide markets with a final solution to end the two-year debt crisis, while the European Central Bank explained that it will not intervene and act as a lender of last resort, which spread pessimism and fears in the market, especially when Italian yields remained unsustainable and doubts controlled the market that soon Italy will fall, and then the monetary policy will follow.

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.

Highlights for this week that will probably affect Crude Oil direction are:

Monday January 2:

TheUnited Stateswill be on New Year’s DayHoliday.

Tuesday January 3:

TheUnited Stateswill join the session at 15:00 GMT with the Construction Spending Monthly Index for November, which could have expanded by 0.5% from 0.8%.

TheUnited Stateswill also release the ISM Manufacturing for December, with expectations the index could have expanded to 53.2 from 52.7.

At 19:00 GMT the Federal Reserve will provide markets with the Minutes of the FOMC last meeting.

Wednesday January 4:

TheUnited Stateswill join the session at 15:00 GMT with the factory orders index for November, which could have expanded by 2.0% from the previous drop of 0.4%.

Thursday January 5:

TheUnited Stateswill join the session at 13:15 GMT with the ADP Employment Change from December, where the private sector is projected to add 175 thousand additional jobs compared with the previous addition of 206 thousand jobs.

At 13:30 GMT theUnited Stateswill release the Initial Jobless Claims (DEC 31), where jobless claims are expected lower at 375 thousands compared with the prior 381 thousands.

At 15:00 GMT theUnited Stateswill provide the ISM Non-Manufacturing Composite index for December, which could have expanded to 53.0 from 52.0.

At 16:00 GMT, the EIA report for crude oil inventories will be released for the week ending December 30, where last week crude oil inventories increased by 3.9 million barrels.

Friday January 6:

The United States will join the session at 13:30 GMT with the Monthly Jobs Report for December, with expectation the economy will add 150 thousands new jobs compared with the prior addition of 120 thousands, yet the unemployment rate is projected to climb to 8.7% from 8.6%. The average hourly earning monthly index could have slightly expanded by 0.2% from the previous drop of 0.1%.