Brent Crude broke through its upper trend channel despite the strengthening dollar (one would normally expect prices to fall). The down-trend is losing momentum and (Brent) crude is likely to form a base above $100/barrel.
CFTC Limits Commodity Speculation
The Commodity Futures Trading Commission (CFTC) voted 3 to 2 today to limit trading in oil, wheat, gold and other commodities after a boom in raw-materials speculation, record- high prices and years of debate and delay.
The rule limits the number of contracts a single firm can hold and it limits traders to 25 percent of deliverable supply in the month nearest to delivery.
Oil touches new 2011 low – Business – CBC News
The price of oil, Canada’s biggest commodity export, reached a new 2011 low Tuesday.
November oil slipped as much as $74.95 US a barrel, its lowest since September of 2010. It recovered somewhat, but still closed down $1.94 at $75.67 on the New York Mercantile Exchange, its third straight day of losses.
Crude rose to three-year highs this year, but the reasons often cited for that increase — fears of growing Middle East tensions, rising Chinese demand, bullish views from investment banks and expectations of an aggressive U.S. stimulus plan — have diminished.
Other market watchers have suggested the price gained solely because of rampant speculation on the commodities markets.
Gold and crude suffer from strong dollar
Spot Gold is testing support at its initial target of $1600/ounce. The long tail is evidence of buying support, but failure would test $1500. The primary trend direction remains up and, despite gold experiencing a strong correction, is unlikely to change.
* Target calculation: 1750 – ( 1900 – 1750 ) = 1600
Brent crude is testing support at $104/barrel while Nymex WTI crude is at $80/barrel. There is no sign of the divergence between the two grades closing. Both have signaled a primary down-trend, though Brent has yet to confirm with a break of its rising trendline.
* Target calculation: 105 – ( 120 – 105 ) = 90
Crude
The strengthening dollar caused crude prices to soften, with Brent crude headed for another test of support at $104/$105 per barrel. Failure of support would warn of a down-swing to $90, but breakout above the descending trendline is equally likely and would suggest a new primary advance.
* Target calculation: 105 – ( 120 – 105 ) = 90
The spread between Brent and Nymex WTI crude narrowed to $20. An increase in supply from Libya or Nigeria would help to lower Brent prices further.
Crude rising
The Brent Crude rally since mid-August is now testing the descending trendline at $115/barrel. Breakout above this level would warn that the down-trend is ending. Recovery above $120 would signal a fresh primary advance. Rising crude prices are a negative sign for economic recovery, placing a further damper on consumer spending. Reversal below support at $105, however would signal a decline to $90*.
* Target calculation: 105 – ( 120 – 105 ) = 90
Brent Crude ignores good news
Brent crude is stubbornly holding above support at $104/$105 per barrel despite the promise of an early resolution to the conflict in Libya. Even WTI Light crude [lime] recovered slightly after improved manufacturing orders in the US. But the primary trend is down and failure of support at $104 would offer a target of $90 per barrel.
* Target calculation: 105 – ( 120 – 105 ) = 90