The WTI Crude market had a back and forth session during the Wednesday, as we continue to churn just below the $93.00 level. This level is resistive as I had anticipated, and as a result this does not surprise me. Adding to the bearishness however, was the report coming out of the International Energy Agency which suggested that demand for crude oil would continue to weaken during the course of 2013.
However, you must keep in mind that the WTI market mainly concerns the North Americans, and as a result you have to look at the United States. The US is one of the few places in the world right now that has significant growth going on, and most certainly the most important growing economy. With that being said, the WTI contract should continue to outperform other oil markets. The Brent market comes to mind immediately, as it had a very poor showing during the same session. This makes sense, as Brent is mainly used by Europeans and the Middle East, and as a result is much more sensitive to their economies.
With all that being said, I still believe that we will settle into a nice range for spring and summer. I think it will be between the $90.00 level on the bottom, and possibly the $96.00 level on top. The $93.00 is obviously a cluster that needs to be doubt with, but I believe in the end it will be relatively minor before it's all said and done.
There are a lot of things that can move this market, but my biggest concern would be the US dollar. As long as the US dollar continues to appreciate, it is possible that oil will start to soften. However, I find the area between $90.00 and $86.00 far too noisy to even consider shorting at that point. If that happens, quite frankly I would be very reluctant to be involved in the market at all. On the other hand, as long as the United States shows strength, it should mean more demand. If that's the case, we could get push towards the top of this range. There will be more demand coming as the temperatures warm due to driving conditions, but quite frankly I find it hard to see a breakout anytime soon.