Crude futures are struggling within a tight range between $77 and $82 a barrel, according to Mike Sander of Sander Capital Advisors. Prices are failing to make an upside breakout because the economic data hasn't yet showed a clear recovery trend, Sander said.
"The markets are optimistic but much of Main Street is not," he said. "The U.S. and Europe still have horrible unemployment situations, which do not look to get any better."
Given the background, this Friday's U.S. employment data for March will be a crucial factor for the commodity markets. Consensus forecasts suggest the economy created 190,000 jobs in March while some analysts are calling for a rise of 300,000 or possibly more.
Such an increase may provide a catalyst for an upside breakout though the move may be limited until investors get further evidence that a trend is building and the labor market is on the mend.
Matthew Kaleel, Co-founder and Portfolio Manager at H-3 Global Advisors expects a trading range between $75 and $85 in the short term and if a breakout does come, the move will be lower barring a geo-political event such as supply disruption.
"A potential confrontation with Iran could affect supply but apart from this the market is well-balanced and the world is still in need of some form of positive stimulus," Kaleel said.
Canada will press the Group of Eight leading industrialized nations to tighten United Nations sanctions on Iran when it hosts a meeting of foreign ministers from the grouping on Monday and Tuesday. Meanwhile, the New York Times reported Sunday that U.N. inspectors and intelligence specialists in western countries believe Iran may be preparing to build at least two additional secret nuclear sites.
Despite lingering fears over sovereign debt problems in Europe, oil has performed robustly and prices should stabilize this week, said Gavin Wendt, Senior Resources Analyst at Mine Life.
"Adding further momentum is the fact that oil usually performs well at this time of year due to refinery maintenance and ahead of the U.S. driving season," Wendt said.
U.S. government supply data this week will be closely watched particularly for evidence that refined product demand is starting to snap back.
Arguably, the focus remains doggedly on the data, the U.S. dollar and the broader equities market.
"Much of the inter-day gyrations in oil prices last week were attributed to the effects of fluctuating exchange rates and movements in the equity markets, which have recently overshadowed supply-demand fundamentals," Platts noted in its weekly market review.