With Demand Rising Again, Crude Prices Could Have Floor in Place

Frederic Ruffy submits: SentimentVolatility picked up a notch on options expiration Friday. The table was set for early losses on Wall Street after BofA (BAC) and Citi (C) posted stronger than expected earnings, but fell short on revenues.

Brent crude will hover around US$100 a barrel for the next two years, a Reuters poll showed after analysts slashed their forecasts for the oil price to reflect ample supply and sluggish economic growth. Brent crude oil will average US$107.60 per barrel this year, Reuters monthly oil price survey for April predicted on Tuesday, down from US$110.80 in last month’s poll and below last year’s average price of US$111.70.

Oil prices rose about 5 percent last week to finish only a dollar short of regaining triple-digit status. Since dipping below $80 per barrel on October 3, West Texas Intermediate (WTI) prices have increased almost 28 percent. This increase is nearly twice that of the S&P 500 Index, up 15 percent since October 3, but reinforces a recent trend for oil prices—as equities go, so goes oil. This chart put together by the U.S. Energy Information Administration (EIA), illustrates how WTI crude oil prices and equities have moved nearly in tandem over the past few months.

Zman submits:The Long Brent/Short WTI trade has continued to edge towards unwinding a bit over the last two days. We've been talking about this for the last couple of weeks as Brent lept ahead of WTI due to the combination of strong demand for refined products in Europe (a systemically short finished products region), troubles with North Sea and Norway production, and rising Asian demand vs.

Ananthan Thangavel submits:The crude oil market remains volatile and closely watched in the wake of unrest in Egypt. The possibility of disruption at the Suez canal sent oil prices surging off of the 100 day moving average, from $85.28/barrel to $92.19. However, since peaking out one week ago, crude has fallen all the way back to $87.45, only slightly above where it began the fear-induced rally.

Frederic Ruffy submits: Sentiment Major averages are holding modest gains on a slow news day Friday. The only economic stat of the day was a report on wholesale inventories, which showed an increase of 1.3 percent in July and much higher than the .4 percent increase that economists had expected. The market showed little reaction to the data.

Andrew Wilkinson submits: Research in Motion Limited (RIMM) – Optimistic options players populated the Blackberry maker’s August contract, selling puts and buying calls to prepare for the price of the underlying stock to continue climbing ahead of expiration day next month.