Crude oil continues to struggle against the $62.50 level of technical resistance

Traders and short-term speculators tried again to break through the $62.50 level of technical resistance for crude oil, but were once again unsuccessful. It's possible that they will try again, but the odds are now against them. Barring some kind of breakthrough, the odds are that crude will continue to retreat for the next few weeks, possibly back down to the mid-$50's.

Despite all the chatter, crude oil is mostly trading based on short-term chart "technicals" rather than long-term economic fundamentals. In particular, the chart shows that $62.50 is a level of intense technical resistance.

There is more than enough crude sloshing around in inventories to fail to justify such elevated prices, but inventories are quite volatile and volatility gets traders and short-term speculators excited and active. The official EIA inventory report notes that:

Total commercial petroleum inventories plummeted by 15.8 million barrels last week, and are now just below the upper end of the average range for this time of year.

Traders and short-term speculators usually react to weekly fluctuations rather than paying attention to overall inventory levels.

That said, speculators could also continue to push crude up in a continuation of the speculative commodities bubble.

-- Jack Krupansky