Crude oil has raced up by nearly 75% in the current year, tipping above $80 on a few occasions on ideas that the pace of the global economic recovery is accelerating. The rebound in prices, which had dropped as low as $32.40 a barrel in December last year, came after OPEC members agreed to cut production late last year. The recovery gathered further steam as risky assets geared higher following a secular slide in the US dollar since March this year.

Oil is expected to face a critical resistance around $79-80 levels as there is excess froth in the prices and $80 might not be sustainable for the commodity from hereon. However, the commodity has shown remarkable tendency to hung around the $75-80 threshold as the long term output is the world’s oilfields is declining faster than previously thought, as noted by the International Energy Agency (IEA) in its annual report.

Domestic crude oil futures for December expiry contract are also looking bearish until they manage to close above the Rs 3700 mark. In the fortnight ending 20 November the December oil contract closed above Rs 3700 mark only once, and hence it may find supports at Rs 3590 & 3500 levels.

OPEC members are scheduled to meet on Dec. 22 in Luanda to review production quotas that the group left unchanged at three gatherings in 2009. OPEC last agreed to increase supply targets in September 2007. The recent statements coming in from OPEC expressed that $ 75-80 per barrel is a fair price for crude and they are not looking to touch production when they meet in December. Also supplies are still on the higher side and at this point in time, OPEC countries have 62 days of forward cover.