$100 a Barrel for US Oil Looms Again

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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.

(Read More: Informed Money's Oil Trade: Gartman)

"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."

Brent crude settled 1.3 percent higher for the week while U.S. crude futures gained 1.9 percent despite downwards revisions by the Organization of the Petroleum Exporting Countries (OPEC) and the U.S. Energy Information Administration to global oil demand growth forecasts.

(Read More: OPEC Sees Higher Demand, More Oil Pumping in 2013)

The International Energy Agency said last week that modest economic growth was limiting global oil demand and some developed economies would see declines in oil consumption this year, Reuters reported.

To be sure, the century mark has proven elusive for U.S. crude so far this year and Monday's trading action once again illustrated how resilient the target has been.

U.S. crude oil hit a nine-month high near $99 a barrel on Monday but reversed to settle lower while Brent touched a 10-week high close to $107 a barrel but prices finished slightly lower on the day after a late sell-off in U.S. gasoline futures.

ANZ commodity analysts on June 14 pointed out that the upper end of the $97-$100 a barrel range has represented "tough resistance" for WTI crude and the market has failed to break through five times this year.

Fed 'Status Quo'?

Front and center in this week's calendar for global financial markets is the two-day meeting of the U.S. Federal Reserve starting on Tuesday.

"Despite all the tapering talk, we think the Fed will maintain its bond buying at its current pace," IHS Global Insight U.S. economists Paul Edelstein and Stephanie Karol said in a note. Fed Chief Ben Bernanke "has an opportunity to clarify for markets that, even if the Fed tapers later this year, interest rate hikes are still far in the future."

That would provide a positive driver for equities and risks assets broadly – including commodity markets and oil.

"I expect any Fed statements will reiterate the 'status quo.' The idea of 'risk-on' seems to be the prevalent mood," said Tom Weber, senior commodity advisor at Portfolio Managers, Inc. Commodity Futures & Options in Los Angeles. "Fed tapering before 2014 is, in my opinion, an outright hallucination. Global QE [quantitative easing] and random positive economic snippets should continue to buoy the equity bulls. Crude should go along for the ride."

(Read More: Why the Fed Will Try to Calm Market Nerves)

Echoing the view that $98-a-barrel U.S. crude is the number to watch this week, Weber targeted chart resistance levels at $98.22, $98.57, and $99.77. "A daily close above $98.22 argues for a move higher. Overall, I'm going with a neutral outlook and be prepared for any surprises to the upside."

Political Risk

Respondents to the survey said the escalating conflict in Syria and Washington's decision last week to arm the opponents of President Bashar al-Assad may tip the balance towards higher prices though the surprise landslide victory of a moderate candidate, Hassan Rowhani, as Iran's next president, may mitigate any gains.

(Read More: Oil Hits 9-Month High As Syria Tensions Escalate)

Iran's election outcome "is likely to bolster the current market perception that geopolitical risk to oil output related to Iran's nuclear program is low – for now at least," said Alastair Newton, senior political risk analyst at Nomura.