The price of crude recently hit the first level of support around $70 and sprung off that level with some gusto as we approach the end of 2009. It’s getting back up to the $80 level as terror concerns, Iran protests and Russia supply threats raise supply concerns heading into the new year.
Antigovernment protests have flared up in Iran again leaving eight dead .. expect more of that to continue in 2010. The attempted take down of an airliner over Detroit this weekend has also rekindled terror concerns especially considering Al Qaeda gas warned of more retaliation. Throw in more Russian threats of cutting off oil supplies to Europe and you have the ingredients for higher oil prices and fertile ground for short covering.
With crude oil resistance levels at $75 and $77 taken out, it appears likely that a retest of resistance around the $82 level is coming over the next few weeks.
In the past two trading days we’ve seen some significant action take place in the price of crude and in oil stocks as a whole. On Friday, the dollar spiked higher and continues to show signs of at least a short term bottom at these levels. As the dollar climbed, oil stocks continued to show signs of deterioration on Friday as many break through key support of their 50 day moving averages. Just a take a look at the live oil charts page and you’ll see all the major oil ETF’s now trading below their 50 day moving averages. However, it wasn’t until today that the price of crude dropped below the key $75 level. With the dollar rocketing higher Friday, it was surprising to see crude hang in there above $75, but it didn’t last long. The longer crude prices stay below $75, I think the greater the chance we test the $65 level. Take a look at key support and resistance levels of the price of crude here.