Crude Oil Prices Fail to Breach $90

Traders look to compound on yesterday’s gains as the spot crude oil approaches the $90 level. However, the rise in price may be capped by the psychological price level as low liquidity in the markets impact volatility and another round of negative news from the euro zone may strengthen the dollar.

At the opening of the New York trading session, the price of spot crude oil was trading lower at $89.30 after opening at $89.38. The commodity was building on yesterday’s gains that saw the pair close above of a consolidation pattern for the first time since early December.

Spot crude oil rose to a high of $89.91 during European trading before heading lower in the New York trading session. This highlights the resistance that is building at the $90 level. Big round numbers sometimes have a psychological impact as traders amass their limit or stop orders near these numbers.

Also impacting the price of spot crude oil has been the steady stream of negative news from Europe. Worries of sovereign debt downgrades have moved through the market the past two days with Belgium and France the newest targets of the rating firms.

Despite the negative news from Europe, the dollar is little changed over the past two days with the EUR/USD trading in a tight range between 1.32 and 1.31. This may have limited the downside in spot crude oil as a stronger dollar typically weakens the price of spot crude oil.

The tight range for the EUR/USD also exemplifies the lack of liquidity in the markets as the holidays draw near. This increases price volatility as large swings in the price of spot crude oil and other commodities such as silver and gold have been registered over today’s trading. As such, large price moves may be exaggerated. A near term target for spot crude oil may be the December 7th high at $90.75.