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Written by Sumit Roy  |

September 12, 2012

WTI Crude Oil May Rise 12% Or More After Technical Breakout

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U.S. crude oil inventories rose last week, but all eyes are on Thursday’s Fed decision.

The Department of Energy reported this morning that in the week ending Sept.7, U.S. crude oil inventories increased by 2 million barrels, gasoline inventories decreased by 1.2 million barrels, distillate inventories increased by 1.5 million barrels and total petroleum inventories increased by 3.4 million barrels.

Crude oil prices edged higher after the latest inventory figures. Both Brent and WTI are near the top end of their recent ranges. Are prices set to break out to the upside?

That depends on Thursday’s monetary policy decision from the Federal Reserve. Commodities as a whole are now beholden to the macroeconomic news flow, and the Sept. 13 Fed meeting may be one of the most significant market movers of the year.

If the U.S. central bank unveils a third round of quantitative easing (QE3) as expected, expect oil prices to rise notably. An upside break of the $117 level may allow Brent to rally toward key technical resistance near $127.

That corresponds to a target of $109 for WTI based on current differentials. A narrowing of the WTI-Brent spread—which many anticipate—could move that target even higher.

BRENT

WTI