NEW YORK ( TheStreet) -- Crude oil seesawed on Tuesday and settled in line with the previous day's trade, as the Federal Open Market Committee meeting and Fed chairman Ben Bernanke's press conference scheduled for Wednesday weighed on the recent upside in the oil markets.

A key technical threshold was also weighing on the oil trade, as crude oil had topped $113 during Monday trading. The $113 level has proved to be the recent resistance point for the oil trade.

Nymex crude oil futures reached as high as $112.64 during Tuesday's market action, but settled in the afternoon at $112.21, higher than the previous settle of $112.11. Brent crude was recently trading at $124.22, up 0.4%.

"Pushing through $113 takes more buying support, and we're in a range where people are happy to take profits," said commodities analyst Matt Smith of Summit Energy. "Despite everything going on in the Middle East, it's a bit of a stalemate."

Phil Flynn, market strategist at PFG Best, said that a key resistance level for commodities, more generally than specific to oil prices, has been tested this week, with oil hitting $113 on Monday and silver testing $50, and that the Fed meeting has heightened the focus on inflation and the run-up in commodities with a weak dollar.

"I still think we exceed these levels; I think we just got there too soon, and that's one reason why people may have taken off some bets," Flynn said. "What happens with the Fed is a major event for commodities. I can't think of a more important Fed meeting in recent memory," the market strategist added.

Gold and silver also headed lower on Tuesday morning.

The market is looking for any recognition from the Fed of a link between its loose monetary policy and commodities inflation, on the one hand -- though no one believes "QE2" will end before it expires in June -- as well as any signal that a QE3 could be on the horizon, and Bernanke sticking to his argument that inflation is not a major concern and can be dealt with expeditiously by the Fed when, and if, needed. QE, or quantitative easing, is the process by which the Fed purchases long-term Treasuries with the objective of maintaining low interest rates so that the economic recovery may continue.

The seesaw action in the oil trade could be part of a late-to-the-game market syndrome as well, said commodities trading adviser John McClane of Mobius Asset Management. "This has been the spot where oil pauses a little, and all the weaklings are run out, the profit-takers who came in late to the game and at the first visit from the boogeyman are heading out," McClane said. "It's going to be harder to push past $113 before the Fed meeting," the portfolio manager said.

Yet McClane noted that on Monday oil prices swung from as high as $113.48 down to $111, and it's the type of action that amounts to "next to nothing" amid the recent oil trade volatility and at the current inflated prices.

"Monday's high was higher than the last close. You get $1.25 back in the oil trade in an hour or less in this market and there is nothing wrong with being safe ahead of Bernanke," McClane said, adding, "from the longer-term view, nothing has changed."

The portfolio manager said the oil trade is still tilted to the upside until there is proof of a structured top being built into the trade. "If over two to three weeks we see a building of structure at the top of the oil trade, there could be a more noticeable correction, but it can't happen with prices flopping back and forth. It's still easy for bulls to come in and buy breaks," McClane said.

"Risk appetite moves up and down and investors are protecting profits. If the Fed misjudges, we could see a spike that really causes demand destruction," PFG Best's Flynn said. "The Fed has necessarily been wrong, but it would be wrong to think that QE2 has had no impact on commodities prices. I would argue it's had more impact than the Middle East risk premium, though the former is long term while the Mideast situation is shorter term. At this point, the Fed is just giving investors a free hand to keep buying commodities."

The CEO of Saudi Arabia's oil company Aramco, Khalid al-Falih, said on Tuesday that Saudi Arabia was concerned about the impact of current oil prices on the world economy -- a headline, yet not news to those who closely follow the oil markets.

Greg Priddy, oil markets analyst at the Eurasia Group, told TheStreet last week in his talks with Saudi officials they have expressed the fear of high oil prices stalling out the recovery in the U.S., but oil prices are still nowhere near the trigger level for swift action from the Saudis in terms of production levels.

Energy stocks were gaining during bullish trading on Tuesday, though up slightly less than the broad equity markets with a gain of 0.6%.

Oil refiner stocks were the big loser among energy stocks on Tuesday after a headline earnings per share miss from Valero ( VLO) by a penny. Valero shares were down by 1.8%, while CVR Energy ( CVI) and Western Refining ( WNR) led the retreat in the refiners, down 5%. CVR and Western have gained more than 70% and 50% year to date, respectively. Holly ( HOC) and Frontier Oil ( FTO), were also down 5% on Tuesday.

The refiner stocks have remained a volatile trade throughout the year-to-date period, with successive stages of profit-taking during the rally.

There were also refinery outages in Texas on Tuesday morning amid an electricity outage in Texas City. Valero said its Texas City refinery was restarting operations on Tuesday morning.

" Although the Valero headline miss is the main driver, I think refinery outages are just part of the business," commented Sam Margolin, analyst at Dahlman Rose. "The outages aren't worse than ones reported in February due to weather in West Texas, when the stocks were on a huge and extended move up. The good news for Valero is that they have completed maintenance, and the next quarters should be much stronger to the extent of the sustainability of the current margin environment."

The earnings reports from the super major oil companies kick off on Wednesday when BP ( BP), which also suffered a refinery outage on Tuesday, and ConocoPhillips ( COP) report.

Most of the oil majors were gaining on Tuesday, led by the U.S. majors, with ConocoPhillips, Chevron ( CVX) and Exxon ( XOM), all up by more than 1%, even as the White House pressed Congress to act legislation to cut tax breaks for oil and gas companies.

The biggest winner in the energy sector on Tuesday was W&T Offshore ( WTI), which on the strength of its first quarter earnings and outlook, and the announcement of an acquisition to replace mature assets, rose by 17% on Tuesday, to a new 52-week high. W&T Offshore experienced a 52-week low of $8.25 last summer.

-- Written by Eric Rosenbaum from New York.


>To contact the writer of this article, click here: Eric Rosenbaum.

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