Benchmark crude oil futures will likely extend last week’s 0.7 percent slide after failing to make a convincing break above $83 a barrel to challenge the highs of 2010, according to a CNBC weekly market poll.
Six out of 15 respondents, or 40 percent, expect prices to fall this week, a third forecast prices to remain unchanged while four made bullish calls.
The lack of any clear majority in this week’s poll reflects a similar uncertainty in the overall oil market direction and bias, meaning futures will remain trapped in a tight trading range.
“I like the range. However, I’m fast becoming frustrated with it,” said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.
Macro-economic data may not be offering a clear picture on whether the recovery is gaining traction while the unfolding debt crisis in Europe continues to create volatility in currencies and equities making global markets difficult to navigate.
If that wasn’t enough, throw in policy uncertainty in China and health care reform in the U.S.
"What does it mean for price action? Expect to see “heavy resistance at the $84 level,” says Mark Waggoner, President of Excel Futures.
U.S. data this will be closely watched for signs the recovery is gaining momentum. If the numbers signal an improvement in the U.S. housing market or a pick up in consumer confidence, those could be catalysts contributing to another break above $80.
“I’m bullish the oil market and the stock market as green shoots have blossomed now,” said Chris Mennis, President of New Wave Energy LLC. “Employment will be the last indicator, and I expect job growth in the next report. As workers return to work, so will demand.”
Meanwhile, emerging market demand for oil shows resilience. China's apparent oil demand rose 19.4 percent in February from a year earlier, the second highest growth since Reuters started calculations based on official data in Jan 2005.
Analysts warned that while a recovery in U.S. gasoline demand reflected increased confidence in the broader economy, higher pump prices threatened to stifle recovery.
“My concern for gasoline prices grows by the day,” said John Licata, Chief Investment Strategist at Blue Phoenix Inc. “Imagine this: we are trading at roughly $2.30 a gallon wholesale and prices at the pump are already comfortably over $3/gallon meaning this summer could spell heartache for consumers.”
Oil’s failure to hold above $83 last week is short-term bearish but downside is very limited to around $78, Licata said.
Mike Sander of Sander Capital Advisors agrees. “As long as the U.S. government continues to deficit spend oil will stay high in price,” he said. “I don't see oil jumping in price in the near future but it will definitely stay elevated above the $75 mark.”