Oil prices could consolidate around current levels this week, supported by expectations that the Federal Reserve won't slow its bond-buying program, according to CNBC's weekly sentiment survey, though some are not excluding an upside surprise and a return to triple-digit U.S. crude.
Strategists highlight the $98 a barrel level for U.S. crude futures – above the upper-end of the $90 to $97 trading range held since May 1 – as a critical level. A convincing move above $98 this week may foreshadow a return to $100, defying the weak fundamentals of high supply and soft demand, they say.
Forty percent of respondents (four out of ten) expect prices to remain steady this week while three forecast prices to climb. Oil bulls highlight an increase in speculative net long positions, or bullish bets, to a 15-month high. The remaining three respondents said a correction is due after U.S. futures hit a nine-month high on Friday at $98.25, the poll showed. U.S. futures traded at $97.97 in Asia on Tuesday.
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"WTI (West Texas Intermediate) is now approaching some important levels near the peaks we have seen several times this year, between $97.35 and $98.30," said Dhiren Sarin, chief technical strategist for Asia-Pacific at Barclays, referring to the grade of crude oil underlying the U.S. crude contract.
"We expect these (levels) to be difficult to overcome (this week) and look for a small dip back towards $95.00. However, this bias is marginal and if WTI were to push above $98.25 we would target $100 instead," he added.
If WTI "can clear $98-$99 and hold above that area, then we'll see quite a surge higher over the coming months," said Sean Hyman, editor, Moneynews at the Ultimate Wealth Report. "If we're so awash in oil, it's amazing how the price of oil doesn't seem to know it."