Bloomberg Analysis: Crude Oil Price May Fall to $63 If Cap at "Pivot High" Holds

Crude oil may decline as low as $63 a barrel in New York if prices remain capped by a “pivot high” at $76.47, according to technical analysis by Barclays Capital. Oil futures for October settlement traded around $74 a barrel on the New York Mercantile Exchange today, having lost about 6 percent in August during their first monthly slide since June. Barclays predicts the losses may extend as far as $63 to $65 a barrel if crude stays below the level that confirmed the most recent downward trend, known as a “pivot high.”

On Aug. 19, following a two week fall in which oil dropped 9 percent, crude rose as high as $76.47. That level, higher than the previous and following days’ closing prices, constitutes a pivot high. In the following week, crude slumped to a three month low of $70.76, confirming that the downward slope had not been broken. “Absent a close above $76.47, I think you’ll maintain the downtrend,” Barclays analyst MacNeil Curry said in a telephone interview from New York today.

Prices will first be drawn to $70.35 a barrel, the lowest point reached by the October contract during its slide in May, according to Curry. After that, it is “fairly likely” the commodity will plunge another $6 to $7 as sagging equity indexes drag other markets lower, he said. “The inter-market is not very constructive right now,” Curry said. “Equity markets remain vulnerable to further downside.”

Reporter Grant Smith can be reached at gsmith52@bloomberg.net

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Oil Rises After Report Shows Record Runs at Chinese Refineries

Oil rose for the first time in eight days after China said the country’s refineries processed a record amount of crude last month. Refining volume in China, the world’s second largest energy consumer, climbed 21 percent from a year earlier to 33.4 million metric tons, or 8.1 million barrels a day, according to government statistics. China’s industrial production grew more than estimated in November. “This is the fastest growth in Chinese oil demand since 2004,” Amrita Sen, a London based oil analyst at Barclays Capital, said by phone. “China has really surprised to the upside this year.”

Crude oil for January delivery rose as much as 66 cents, or 0.9 percent, to $71.20 a barrel in electronic trading on the New York Mercantile Exchange. It was at $71.03 a barrel at 1:31 p.m. London time. Oil prices have fallen 8 percent since the beginning of this month and dropped 3 percent on Dec. 9, when a U.S. government report showed U.S. gasoline inventories rose to the highest level since April. Futures are up 59 percent this year. “China’s oil imports just don’t stop growing,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said by phone from Stuttgart. “China will sell more cars than the U.S. this year, and that is pushing up gasoline demand”.....Read the entire article.


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