In the month of August, crude touched multi months low on all sort of bad news. One thing is remarkable, its recovery in the same month. Quickly it gave the recovery on $ 10 within a few days and now it is trading in a range with upside bias. The market is not expecting further panic selling. If we talk about 2011, it fell $40 from its yearly high. This fall is too much and now the market should show some recovery in the prices. Something that is happening inside the energy counter is also a chief concern for the market and it is limiting the downside of sweet crude. We have seen some decoupling in this counter. RBOB gasoline improved roughly around 14% in 2011 whereas crude declined by more than 8%. Furthermore, Europe benchmark brent crude traded with the same pace of RBOB gasoline for the entire year. If we see the historical data, many time it happened that brent traded on premium on supply issues in general. This trend reappeared again and at present Brent is outperforming sweet crude on supply issues.
In near future, any recovery in economic data and supply tightness may push up sweet crude prices and the spread between Brent and sweet crude should normalize to some extent. Seasonal demand may also assist crude to move upward. On the upside, it may touch the level of $95-$100 during this winter and support is near $75.
