NYMEX crude oil prices rise sharply back to $70 on economic recovery signs

Crude oil prices rose sharply on Wednesday [20 Sep 2009] on data showing more signs of recovery in the US. NYMEX crude oil for Nov 2009 delivery rallied $3.90 to end at $70.61 dollars per barrel. The US economy moved close to emerging from recession in Q2 2009 - revised data showed a smaller-than-expected 0.7% output decline. An unexpected and large slide in gasoline inventories implied increasing demand, boosting prices. Last week, oil prices slumped amid concerns over rising supplies and continued weak demand.

Elsewhere, the market digested simmering geopolitical tensions over key crude producer Iran. President Mahmoud Ahmadinejad lashed out at demands for access to Iran's newly disclosed uranium enrichment plant being built near the central holy city of Qom. Iran denies the program is aimed at making atomic weapons.

- In times like these when the market is in a consolidation pattern grinding on for weeks on end, sometimes one might wish that it would just, you know, make up its mind, get on with the program and all that. If you zoom out to a longer-term chart (as above) you would see what I mean. Basically the same thing happened from Dec 2008 to Feb 2009 where oil prices would just go back and forth around the $40 level, neither going below $35 or above $45 for any sustained period. And one fine day, it just decided to break out and upward into a multi-month move.

And then from Aug 2009 to this point in time, we're back in another consolidation pattern, neither going below $65 nor above $75 for any sustained period. In fact, $75.00 (exactly) has been a key resistance level. Some call this a trading range, but I don't see much joy in messing around with narrow ranges. The billion-dollar question is whether the next breakout will be to the upside or to the downside.

Of course as usual, I am on the side of the oil bulls, pointing to the time-lag effect in money supply propagation, government stimulus, green-shoots psychology, and a weak-looking dollar, while on the other hand the oil bears point to weak economic fundamentals, falling CRB and BDI (Baltic Dry Index) charts, and continue to lay claims on a repeat of the meltdown of Aug-Oct 2008. Well it's October dudes. Onward back to $100 oil - or bust - total washout, crash, collapse - whatever is the case.

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