Crude oil prices may rise to $75 a barrel, recouping a week's losses, before the market revisits chart support around $70, said National Australia Bank Limited.
Oil prices, which has slumped 14 per cent in the past four weeks, will gain strength from "a bit of psychology" because the market has fallen too far and too fast for traders who make short-term bets, according to Gordon Manning, a Sydney-based technical analyst at Australia's third-largest bank. While a rally is possible in the coming week, prices are probably set to decline further, he said.
"In the short term, I can see oil popping back up to about $75, then it could go back to $70," Manning said yesterday in a telephone interview. "These markets have resistance levels where they can run to, but still keep within a downward bias." Crude oil fell for a fourth week last week as concerns that Greece, Spain and Portugal may struggle to contain budget deficits drove the euro lower against the dollar, damping the investment appeal of commodities.
The contract for March delivery on the New York Mercantile Exchange traded at $72.45 a barrel, up 56 cents, at 3:33 p.m. Singapore time. Futures have lost 8.7 per cent in 2010. Prices slipped to $69.50 a barrel in floor trading on Feb. 5, the lowest since December 15. This level will present technical support as long as the market doesn't settle below it, according to Manning, who correctly predicted on February 2 that oil would rise above $78 before pulling back.
"Sixty-nine dollars was pretty important on a daily close basis and we sort of nudged around that and we've bounced," he said. "I'm inclined to favor a bit of a bounce in the short term." Oil's current "choppy phase" could favor short-term traders, Manning said. Prices have moved in a $14.45-a-barrel range this year, narrower than the $49.30 band in 2009 and $114.87 in 2008.
"We're going to have a fair bit of reasonable, manageable volatility here," he said."Sideways stuff, if you're a short- term trader, can actually be quite good."Meanwhile, Crude oil prices topped $72 per barrel on the New York Mercantile Exchange yesterday morning, despite a three-week plunge in equity markets.
Price increases may remain subdued in the short term, however, as the Dow Jones industrial average closed below 10,000 points for the first time in three months Monday, after hitting a recent high on January 19. Analysts also are expecting U.S. crude oil and gasoline supplies to increase, as the industry builds up stock to handle an increase in driving, which normally occurs in the spring.
March delivery of light, sweet crude gained 62 cents overnight to $72.51 per barrel. Heating oil prices added 0.0217 cents to $1.9072 per gallon. Reformulated gasoline blendstock prices added 0.0165 cents to $1.9105 per gallon. Natural gas prices fell 0.053 cents to $5.348 per million British thermal units.
At the pump, the national average price of unleaded gasoline was $2.644 per gallon Tuesday, down from Monday's $2.652, AAA said.