Oil Prices Creep Back

There is a lot of debate whether the oil will come back or not to the levels from 2008 (mostly May and June levels, where it reached a peak of $140/barrel. Since then, it continued to drop until February 2009, since it started again to grow. This time, in a much slower manner.

It is true that the recent economical news are slightly better than the previous ones. The US GDP has decreased in quarter 3within the economists expectations. The important word here is “decreased”. And the S&P 500 companies have seen a small recovery. Yet, I think we are several months from the economic recovery whcih could turn recession into a growth trend.

And of course, there is a debate of whether oil prices will anticipate these oil price increases or whether it will go down further, before it picks up. Well, as a technical analyst in my free time, I have quite a simple answer for that. Oil is an intensely traded security, like any other financial asset from the markets. And the oil market is quite well developed. So I guess the oil price has already considered all the bets of the market makers and participants. And these bets are that the demand for oil will increase, but not dramatically. As a market with enough information, the oil one has already considered these good news into the prices. And the volumes are relatively low still, which indicates a lot of prudence from the market participants.

So I guess than now the ball is in the participants’ feelings. If they expect further recovery of the economy, they will push up the prices. Yet, a lot of data is to come at the table to confirm this – the Christmas sales, the unemployment data for the next months, the GDP evolution. Until then, most of the trading is smart guessing…

oil-daily-prices-november-2009

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