This is something I've been talking about for some time: increased demand from the developing world is providing a floor for oil prices. That being said, let's take a look at the charts:
Oil prices have clearly moved through technical support and are now resting in the 92-94 price area. All the EMAs are moving lower and the shorter EMAs are below the longer EMAs. Prices are using the EMAs for technical resistance, another bear market characteristic. Momentum is weak. But most importantly, prices are below the 200 day EMA, the line delineating the difference between a bull and bear market.
On the 5-minute chart, the 95/95.5 are is providing upside resistance. This was the lower boundary of previous support. The 93 area is providing short-term support. However, the primary trend from last week is one of sideways consolidation.
The oil market is caught between two different issues. In the short-term, there is concern about the pace of expansion. Lower growth = lower oil demand = lower prices. However, as I pointed out above, there has been a strong, fundamental, long-term shift in the world's oil demand as countries like India and China have grown with their demand has supplementing US/EU demand, providing a long-term floor under prices. But currently, these countries are also tying to slow growth due to increased inflationary pressures within their respective countries. In other words, there is currently a great deal of negative sentiment weighing down oil prices.
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The IEA announced that it was going to release 60 million barrels of oil next month. Hopefully, this will cause speculators to sell on the oil markets. I believe speculators will start bringing oil prices down if somehow the international community can remove Ghadafi from power. From the perspective of oil prices, Obama's Lybia policy has been a mistake.
Another factor causing pressure on oil prices to fall is the high probability of a double dip recession. Once again, the job claims data was poor. I expect the next jobs report in July to be very weak. I can see the unemployment rate moving up to 9.2 or 9.3 percent. The odds that the Republicans will retake the White House in 2012 in my estimation is now better than 50-50. However, Obama still has the best chance to be president in February, 2013 than any single other candidate.
The economy may be in a depression. A depression need not be a single severe recession. In fact, most depressions are a tale of multiple recessions. For example, the Great Depression was a tale of two recessions, 1929 and 1937. At the very least, the US economy has been in a period like Japan's lost decade.
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