This chart of the NYMEX price for crude from August 3 to September 3 show's the "pivot high" price of $76.47 identified by Barclay's as the small peak near the end of the time period. (image: oil-prices.net)

The price of crude could be on its way down to $63 a barrel in the short to medium term, according to a technical analysis of market trends released on Tuesday. The investing website favstocks.com published the results of a Barclays Capital analysis that found the price of crude could soon drop significantly if it stays within it recent trading range. “Absent a close above $76.47, I think you’ll maintain the downtrend,” said Barclays analyst MacNeil Curry.

$76.47 was identified by the analysis as a “pivot high” price—a short-term price peak after which prices decline in the short to medium term. Since the report was published, oil prices have increased markedly, but did not close above the $76.47 mark at any point this week.

If the Barclays scenario plays out, the price of crude will begin to descend over the next few weeks, bottoming out at $63 to $65 per barrel. That would being major decreases in heating oil prices in the final days of summer, making pre-season top-offs of heating oil tanks more affordable. The technical analysis only applies to the next month or so of crude prices, and how prices will move during the winter is still largely unclear. However, huge supplies of crude and heating oil around the country and extremely low demand for petroleum products as a result of a still-weak economy are good signs. At the very least, if predictions by the Department of Energy are to be trusted, increases in heating oil prices this winter will come gradually, with fewer sudden price spikes than in previous years.

Oil prices rose for the fourth day in a row on Friday. (Nicholas Whitaker for HeatingOil.com)

Crude oil and heating oil prices continued their weeklong rally on Friday as stock market gains pushed oil prices higher. Oil is tied to the stock markets because oil demand is connected to the growth of the economy and stocks are considered a gauge of economic growth. Since a stock market rally points to a growing economy that will consume more oil, oil prices tend to rise when stock prices rise. The stock market will likely continue to shape oil prices in the week to come as investors focus on corporate quarterly earnings reports that will be issued this week.

Today’s average retail heating oil price in the Northeast is 2 cents higher than Friday’s average price.

Oil prices skidded on negative economic news from the US and China. (image: Nicholas Whitaker for HeatingOil.com)

Oil prices continued to slide on Thursday as economic indicators from China and the US raised fears of a “double-dip” recession that would curb oil demand. Slowdowns in manufacturing growth in the US and China—the two largest oil consumers in the world—undercut hopes that global economic recovery would be steady and brisk. The outlook for economic recovery has been a key driver of oil prices, since supplies of crude oil and refined products remain more than ample enough to meet demand, and this week’s news provided no reason for optimism. Oil prices have fallen so precipitously this week that when the US released grim employment numbers on Friday morning the oil markets hardly stirred, having already factored in the effect of sluggish growth in the US economy.

Today’s average retail heating oil price in the Northeast is 7 cents lower than Thursday’s average price.

An oil trader’s drinking problem pushed the price of Brent crude oil to new highs in 2009. (image: muchomartiniglasses.com)

Oil prices are determined by a number of different factors: supply, demand, currency values, global stock markets, and weeklong drinking binges by oil traders. Steven Noel Perkins, a former oil trader, has been fined £72,000 (US$108,000) for the unauthorized purchase of $520 million worth of Brent crude oil futures contracts—some 7 million barrels—while in the middle of a bender.

Perkins worked for PVM Oil Futures Ltd. and traded on the ICE Futures Europe exchange in London. PVM trades on behalf of clients, but Perkins’s trades of June 29 and 30, 2009 were made without any authorization from clients and, according to the British financial regulator FSA, “As a direct result of Perkins’ trading, the price of Brent increased significantly.” Reuters reports that Perkins’s trades pushed the price of Brent crude to a 2009 high of $73.50 a barrel.

Bloomberg reports the full story of the illicit trades, which began on Monday, June 29, 2009. A weekend drinking jag that included a golf trip with PVM lasted into Monday for Perkins, and he phoned in eight trades—only one of them authorized by a client—to a PVM broker that afternoon. The trading continued into the early morning hours of Tuesday, June 30, at which point Perkins had accumulated contracts for 7 million barrels of oil, though he was in no condition to know it. According to a statement from the FSA:

He drank heavily throughout the weekend and continued drinking from around midday on Monday 29 June….He claims to have limited recollection of events on Monday and claims to have been in an alcohol-induced blackout at the time he traded in the early hours of 30 June.

Perkins has since stopped drinking and been to rehab, and his firm, PVM, lost about $10 million closing out the unauthorized trades, but there’s no recourse for consumers who may have paid higher prices for oil products as a result of drunken and unauthorized trades that drove up the market price for Brent crude oil. It’s not the first time we’ve heard of oil traders’ gaffes affecting oil prices and hurting consumers—sometimes mistakes in basic geography drive up prices, and just a year ago another oil trader in London got fined for trades he made after he got drunk at lunch, apparently something of a pattern in the London markets.

Perkins won’t be trading for at least five years—the FSA has banned him—but his case provides some insight into what people mean when they talk about the “complexity” of commodity markets.

Oil prices climbed as a storm system in the Gulf posed a possible threat to oil production. (image: Nicholas Whitaker for HeatingOil.com)

Oil prices spiked on Friday as a weather system in the Gulf of Mexico threatened to develop into a tropical storm and possibly disrupt oil production in the Gulf. The US and Mexico both have oil drilling and storage operations that could have to be closed in case of a severe storm, but Friday’s price increase came as the storm appeared to be headed toward the area where US operations are concentrated. Though the weather system did become tropical storm Alex over the weekend, crude oil and heating oil prices fell in early trading on Monday as new forecasts showed the storm moving away from US offshore operations.

Today’s average retail heating oil price in the Northeast is 5 cents higher than Friday’s average price.

(image: ft.com)

A rally in US stock markets led crude and heating oil prices higher today, lifting the price of crude oil to a four-week high of $75.48 a barrel.  A recent upward revision in 2010 global oil demand forecasts by the International Energy Agency and a stronger euro helped support crude oil’s gains.  Data released this morning that showed a slight increase in China’s crude oil imports over this time last year also provided support for oil prices.Today’s big increases marked the third day in a row that the price of crude closed higher than it opened–the first three-day rally since late April.  Oil analyst Tom Bentz doesn’t believe the upward trend will last, however, as he told the Wall Street Journal, “There’s a real risk to being long again in the upper $70s.  I’m not sure I believe that we’ve seen the last of the European debt problems.”

Today’s Closing Prices on the NYMEX

Crude oil (July 2010 contract): Up 1.7 percent, $75.63 a barrel

Heating oil (July 2010 contract) Up 1.4 percent