Oil prices will likely remain range-bound between $80 and $83 a barrel as investors refrain from taking on any large positions ahead of the November Fed meeting and the prospect of further quantitative easing, a CNBC poll of traders and analysts showed.
For the week that ended October 22, Nymex crude futures for December delivery dropped 44 cents a barrel, or 0.54 percent, settling Friday at $81.69/bbl.
This week, three out of eight respondents forecast prices would remain unchanged, three expected price declines while two believed prices would climb.
“The market will hold $79.50 and will be range bound unless the stock market surges higher and dollar breaks lower,” said Mark Waggoner at Excel Futures. “If the Fed made a surprise announcement on QE2, this could cause a surge higher. If we close above $85, we will most likely hit $100 before the year’s end.”
Phil Flynn, senior energy analyst for PFGBest Research said softness in China’s forward demand could create a break to the downside ahead of the Fed meeting. “We should see some more reduction in China demand expectation premium as they are raising rates and raising domestic prices for petrol,” he said.
Mike Sander of Sander Capital Advisors is also betting on short-term price weakness. “Morgan Stanley earnings after write downs were negative and Bank of Americastill looks horrible,” he said. “The U.S. economy is still in unstable shape. I don’t think we could take higher oil prices and OPEC knows this.”
French refinery strikes may help support prices this week, traders said. French President Nicolas Sarkozy plans to increase the retirement age to 62 from 60 and opposition to those pension reforms have brought operations at the country’s refineries to a halt.
Despite moves by the French government to force some refinery employees back to work through the use of an emergency decree, which unions will contest as illegal, disruption remains widespread and police increasingly have to intervene to ensure that deliveries can get past picket lines -- most notably at Total’s Grandpuits refinery,” JP Morgan energy analysts led by Lawrence Eagles wrote in a report on Oct. 22.
Societe Generale’s Oil Market Scorecard assigns a 2.9, or neutral rating for the market tone. A rating of 1 is ‘strongly bearish’ while a 5 rating is ‘strongly bullish’. “Despite the Chinese rate hike, French strike, and choppy markets, (oil markets are) still range-bound and neutral,” Societe Generale’s Michael Wittner wrote.