WTI Crude Oil Ties The Knot with $88 Price

November 29, 2012 3:27 PM EST
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It has been a heck of a year in the energy market. Looking back on explosive developments in the Middle East, including sanctions on Iran, revolt in Syria, Egypt's birth pains, and so on, not to mention major flare ups in Europe's debt crisis, central bank shockers, China worries, rumors of SPR releases, strikes, hurricanes, and recent focus on the so-called fiscal cliff in the U.S., it is a wonder WTI crude oil prices are lower by just $10 this year.

Given all the drama, one might expect larger movement, though considering opposing pressures placed on the commodity by geopolitical and economic forces, WTI may be exactly where it should be, at around $88 per barrel.

Interestingly, $88 is the center point between yearly lows at $77 and recent highs near $100. While this observation is a simplistic one, it may prove to be increasing important as WTI appears to be consolidating after wild swings in both directions.

Arguably Brent prices have had an even wilder ride, but it too looks to be consolidating and may find a home near $110.

Traders, it seems, are run ragged and exhausted.

The point was illustrated by the most recent conflict between Israel and Hamas, which in years past would have created heavy volatility. Instead, the market reaction was relatively muted.

An increase in non-OPEC production of oil and natural gas may be the fly in the ointment for many energy traders, as its longer-term affects are still unknown. On the one hand, predictions call for North American energy independence. On the other hand, emerging market demand is on the rise.

This throws the already complicated oil puzzle pieces into the air and it may be a while before traders can put them back together again. In the meantime, $88 looks like a comfortable place for WTI as the story continues to unfold.

United States Oil (NYSE: USO) is higher by 1.4 percent intraday on Thursday. In the past 30 day, USO has traded flat.

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