The spread between Brent Crude and Nymex WTI Light Crude remains at $24/barrel. Brent is rallying to test the declining trendline, but retreat to medium-term support at $105 is likely. Resolution of the conflict in Libya should take some of the supply pressure off European refineries, easing Brent prices.
* Target calculation: 105 – ( 120 – 105 ) = 90
We then have to wait and see what Chairman Ben pulls out of his hat at the September 21st FOMC meeting. Further quantitative easing would cause an upward spike in commodity prices, including crude.
Seems like there is a divergence developing between the general markets and oil since about the middle of June. (ie DJI vs Nymex wti).
My guess is that Ben is holding speculators somewhat at bay with his “lies by omission” regarding POMO’s haviing stopped, when in fact they haven’t stopped. And the threat of further overt quantitative easing creating the tension to the up side for oil.
http://www.newyorkfed.org/markets/tot_operation_schedule.html
I am remembering my reluctance to enter the bull runs caused by QE1 and QE2 due to the reduced volume argument in my mind. Currently we have a very aggressive rally in price on very low volume. Whatever (many possible explanations) the mechanism is, seems to be working for price increase on low volume. Pretty hard for me to argue to myself that price shouldn’t be going up on such low volume, when it actually is going up on low volume.
Could it be simply that we have been in a cloaked bear market for two years now, and the countertrends in a bear market are fast, violent and have lower volume than the predominant down trend ?
Philosophically speaking, when the price continues to go up with almost zero volume we will all need to examine our perception of what makes this stuff work.
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