This morning, the price of WTI crude is trading above $102.00 a barrel. Normally, during the holiday season the price of oil will usually increase and trade higher. This is a time when people will begin to travel more by air and car. It is also the start of the winter heating season as temperatures begin to drop in North America and Europe. The big question that many investors are asking themselves is how high will oil trade before the price becomes a negative on the consumer?
On May 2nd, 2011 WTI crude traded as high as $114.83 a barrel. That high print in crude marked the high for the year in the Dow Jones Industrial Average and the S&P 500 Index. High energy prices are considered a direct tax on the consumer. Anytime that oil has traded over $90.00 a barrel for any considerable period of time it has caused another major stock market correction. At this time, WTI oil is trading above the important 50, and 200 moving averages. This tells the world that oil is in an uptrend and in a very strong technical position. The next important resistance level will be around the $105.00 level for WTI crude.
Gasoline has definitely lagged the price of oil over the past month. The United States Gasoline Fund (NYSEARCA:UGA) is trading around the $48.33 level this morning. The UGA is also trading below the important daily chart 200 moving average which is around the $49.50 area. As long as gasoline remains steady at the pump this could help keep the stock markets intact for a bit longer and less effected by high oil prices. The same case can be made when looking at the United States Heating Oil Fund (NYSEARCA:UHN). The UHN is also lagging the price of WTI crude as it trades below all of the major daily chart moving averages. If and when the UHN trades above the $36.00 level, the price of heating oil is going to start to hurt the consumer.
Traders and investors should also remember that oil is very sensitive to weather, geopolitical events, and the value of the U.S. Dollar. Anytime there is talk of a war in the Middle East, oil is likely to trade higher. Either way, high energy prices will eventually hurt the stock markets.