Analysts from Goldman Sachs are declaring that oil prices will likely increase in the near to intermediate term. Price action so far on Tuesday has just about totally negated the nasty red candle from Monday. Oil continues to consolidate near the lows and will eventually either breakdown to new lows and possibly test the 200 period moving average or we will see an extension higher to the $103 – $105 / barrel price level. The daily chart of oil futures is shown below:
In the longer term, we remain extremely bullish on energy as the fundamentals indicate that oil demand will likely continue to rise while supply levels remain flat or begin to increase. Oil prices are likely to go much higher than what most analysts are expecting. For now, I’m going to be watching the key support level illustrated above. If oil prices continue to consolidate at these levels a breakout is nearly inevitable. The question remains which way will oil break?