Crude Upside Is Limited

The crude oil futures market bulls received a belated Christmas present this week when the previously elusive $100-a-barrel mark was notched. February Nymex crude oil prices on Thursday hit a fresh contract and all-time high of $100.09.

Since the early-December low of $85.60 a barrel in February crude oil futures, the market has tacked on around $15 a barrel.

February Nymex Crude Oil

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Source: Futuresource and TradingEducation.com

Fresh speculative buying interest resurfaced in crude oil futures this week amid a resumption in the weaker ways of the U.S. dollar vs. its major counterparts, and general speculator buying interest across the raw commodity futures spectrum on the first week of the new year.

Market fundamentals in crude oil remain in overall favor of the bullish camp. This week's U.S. Department of Energy liquid energy storage data showed a larger-than-expected decline in U.S. crude oil inventories of 4 million barrels; inventories now stand at the lowest levels since January of 2005. However, there was an unexpected rise in heating oil, or distillate, stocks. Distillate stocks rose 600,000 barrels; analysts had expected a 600,000-barrel-decline in stockpiles. U.S. gasoline stocks rose by 1.9 million barrels, while analysts had expected a rise of 1.3 million barrels, according to the DOE. The build in the products did take some of the bullish shine away from the weekly DOE report.

Fresh political unrest in major oil exporter Nigeria flared again this week, and the assassination last week of Pakistani opposition leader Benazir Bhutto added an uncertain undertone to the energy markets. The nuclear-armed Pakistan is in a state of political unrest at present, which has limited selling interest in the energy futures markets.

One important worrisome and possibly overriding fundamental for the liquid energy market bulls is the perceived weakening of the U.S. economy. Just this morning, another dose of weak economic data hit the newswires as U.S. jobs growth in December was much less than consensus forecasts.

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Jim Wyckoff is a senior market analyst for TradingEducation.com a free educational Web site. In addition, Wyckoff writes a blog offering current market commentaries every morning on TraderBlogs.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Wyckoff appreciates your feedback; click here to send him an email.