Crude oil futures for June delivery on the New York Mercantile Exchange have been trading sideways in a choppy fashion on the daily chart for the past four weeks. Neither the bulls nor the bears are gaining much headway as the market languishes. This suggests that the supply-and-demand fundamentals in the crude oil market are presently in balance. Until there is a fresh fundamental development to jolt the liquid energy markets, look for more of the same price action in the coming weeks.
On Wednesday, statements from the Federal Reserve after the latest meeting of the Federal Open Market Committee and from Chairman Ben Bernanke corroborated the notion that Nymex crude oil futures prices are presently fairly balanced. The Fed's latest assessment painted a picture of a U.S. economy that is growing, though in a wobbly and less-than-robust fashion.
Investors who are bullish on crude oil and other raw commodities were a bit disappointed when the FOMC statement and Bernanke seemed to push back farther the likelihood of any further quantitative easing of U.S. monetary policy. In the past nearly four years, the easy-money policies of the U.S. and other major central banks have greased the skids for major bull runs in many commodity markets. In July 2008, nearby Nymex crude oil futures prices hit an all-time record high of $147.27 a barrel at the height of the speculative bullish commodity market fervor.
Fresh fundamental factors that would upset the present price balance in the crude oil market include any escalation in the European Union sovereign debt crisis. A big flare-up in the E.U. crisis would suggest decreasing demand not only in Europe but in the U.S. and China, because of a contagious economic effect. On such a development, Nymex crude would likely drop well below what is now major psychological support at $100 a barrel.
Heightened tensions in the historically volatile Middle East would be bullish for the liquid energy markets. In the past few months, conditions in that oil-rich region have grown calmer. However, history suggests that the calm will not last. Any fresh military saber-rattling from Iran or the U.S. would likely quickly pump at least $10 more "war premium" into the price of a barrel of crude oil.
The aforementioned fundamental factors are the most likely occurrences that would jolt the crude oil market from its present malaise. However, the North Korean military-backed regime, which is generally regarded as unstable, has recently tried to convince the world it is relevant. Any fresh, provocative moves by North Korea would be a wild card that would be bullish for the crude oil market.
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