Oil prices may gain this week as investors expect stronger Asian demand to pick up the slack from a slowdown in the developed market, according to the findings of the latest CNBC survey.
U.S. crude futures last week rose as high as $101.90 a barrel, taking the weekly gain to 0.5 percent, after leaders of the Group of Eight said the global economy is strengthening, and as the dollar dropped to a one-week low against the euro.
A CNBC poll of analysts and traders highlighted a split picture for near-term outlook. Exactly half of the 10 respondents are calling for higher prices this week, three expect prices to fall and two forecast prices to hold steady.
U.S. data will again be the main driver this week. Oil market focus will be pinned squarely on Wednesday's ISM manufacturing activity and May employment report on Friday. Economists expect both readings to show a slowdown, with higher input prices, supply chain disruption from Japan's tsunami disaster and slowing China demand putting the brakes in manufacturing activity.
Though China's demand remains a big open question - with many talking about the risk of a hard-landing there - many still expect overall Asian demand to remain robust, offsetting the torpor from the developed world.
"Even with the poor economic indicators coming out of the U.S., China, and the strengthening U.S. dollar; oil was still hovering around $100," said Andre Julian, Chief Financial Officer at OpVest - Option Investments, Inc. "We still see Asian demand strengthening into the summer, and with Japan rebuilding demand should only increase."
Julian also offered a historical perspective, noting crude oil prices had risen in June in eight out of the 10 past years and in the two years that it didn't, the drop was less than 10 percent. "Although we could see a sell-off into the $95 range, it is inevitable that this price point will be a key level of support and a buying opportunity," he added.
Tom Weber, Managing Director at PFGBest in Los Angeles, also referred to support at $95. If the market breaks below that level, prices may drop back to $88, he said.
"This doesn't make me an oil bear, but we 'gotta trade the chart', Weber said. "Poor economic data, medium to heavy grade crude glut, and general trader disgust with lack of political will to fix debt problems has really cast a nasty dark cloud over most of the markets," he added.
The extended Memorial Day weekend may crimp volumes across the U.S. markets, including oil but more importantly it marks the start of the summer driving season.
"I am not looking for any breakout, up or down," said Linda Rafield, Senior Oil Analyst at Platts. "The holiday-shortened week will keep liquidity low and the markets range bound. The real indicator is the crude options market on NYMEX-traders are betting on the market continuing to trade on either side of $100 and they are usually the lead indicator."
Rafield added: "I do think the downside is vulnerable-demand in the U.S. looks dicey. But the second quarter is generally the lowest demand period of the year."
And as we head into U.S. summer driving season, just how strong will it be especially when you consider the back-breaking price of gasoline at the pump? One indicator - U.S. light-vehicle this Wednesday - should give us some clarity but initial forecasts don't look bright. U.S. auto sales in May on an annualized rate are expected to total 12.2 million, down from the 13.1 million in April.