Crude oil: 4 things you should know

Four things to know about crude oil

What

Last week oil had its biggest weekly advance since June, gaining over five per cent. This means crude has reversed recent declines, retracing a little over two thirds of prior losses.

Why

The outlook for economic growth influences crude prices as stronger growth means higher demand for crude. Last week lower than expected US jobless claims and a decrease in gasoline stockpiles helped drive crude higher. Lower jobless claims is a positive for the economic outlook while shrinking supply with similar or growing demand will drive up prices as buyers fight for supplies.

What next

There is speculation that the European Central Bank could cut its main interest rate still further this week to a record low in order to further stimulate economic growth. The larger technical picture remains uncertain given crude’s range bound price behaviour over the past five months or so. A rally above $97.70 or decline to below $85.88 will be needed before crude moves out of its present range.

What to do?

Resistance is next around $95 followed by $96.30. A break above last week’s high of $93.84 will see crude target the first level at a minimum. Dropping below last Thursday’s low of $91.09 puts crude at risk of further declines and price dropping further.