Crude oil prices have dipped back to $76 a barrel, which is the lowest price in about a month. Crude oil supplies continue to be well above last year's levels and the dollar is trying to rally. It is surprising that gold has rallied so strongly, yet crude oil has been drifting lower. On a pure supply and demand basis, crude oil should not be trading around $80 a barrel.
These are strange times and the economy is awash with liquidity. This funnels money into stocks and commodities and there's no telling how this will play out in the years to come. There is also the argument that much of the incremental demand for oil will come from China and other developing countries. That may be true, but many of the experts are also expecting the U.S. economy to grow sharply the next couple years.
I still think we are seeing nothing but talk yet and little economic growth. The government has skewed economic data for decades. The government is also throwing a large amount of money at this economy and interest rates have been holding near zero for some time. As Scotty would say - "I'm given it all I got captain!" If the economy can barely grow with massive amounts of stimulus, what happens when it is taken away? We can't afford to borrow money until infinity.
For crude oil, it is on strong support around $75. The market looks like it wants to go lower and the mid-60's would be a likely target. The key is to see if it holds the $75 support level. The high end of the range is $82 and it would likely take a huge drop in the dollar to break through there in the near term.