The WTI markets had a bullish session again on Friday, after initially falling. The market closed just below the $92.00 level, and as a result we are pressing up against significant resistance. However, this is only a moment in time, and ultimately we should be seeing higher prices. I think based upon the action on Friday; this would have been more or less a reaction to the US nonfarm payroll report been much better than anticipated. The thinking goes that when there are more people hired, there will be more industrial demand for fuel.
Going forward, I think it's probably prudent to wait for a little bit of a pullback unless of course we can shoot straight above $92.00, and through the cluster that currently sits just above. However, I think that it's only a matter time before we formed a nice consolidation area between $90.00 and $96.00 as it is the next serious resistance point.
The demand for oil should start to pick up in the US, and the WTI contract is the oil contract that is most greatly affected by the American demand cycle. Because of this, I wouldn’t be surprised to see an underlying demand for this commodity. With that being said, it should be interesting to watch the correlation between weekly jobless claims in the USA and this contract. I believe that traders are trying to get ahead of the demand curve on this one at the moment, and this could prove a good way to unwind the shorts just above.
The $90.00 level below has a lot of support underneath it, and because of this I don’t think that the market can go much lower than the $90 handle unless there is some kind of major economic event that would drive the fear trade again. The fact that the US dollar has been gaining has worked against the value of oil lately, but in the end that should be a temporary thing, as the Dollar is gaining due to economic strength rather than the usual fear trade. Demand should start to pick up for WTI, but it will be choppy for a while, and tight stop losses are going to be important because of it.