Crude oil struggles against the $62.50 level of technical resistance

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. Sure enough, crude bumped up against that level this past week ($62.49), but was unable to actually push through the magic $62.50 level.

Traders and short-term speculators could take another couple of shots at $62.50, but it is very likely that they will only push higher if some amount of "real" buying occurs by people who need oil and are not simply trading based on the charts.

Lacking any real upwards momentum, traders and short-term speculators are likely to reverse their positions and bet on crude trading downwards in its trading range.

There is more than enough crude sloshing around in inventories to fail to justify such elevated prices. From the official EIA inventory report notes that:

Total commercial petroleum inventories dropped by 8.9 million barrels last week, but remain above 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 well continue to push crude up in a continuation of the speculative commodities bubble.

-- Jack Krupansky