Merrill’s Bartels Says Oil Will Rise to $70: Technical Analysis

(Bloomberg) -- Crude oil will rise above $70 a barrel this year, said Mary Ann Bartels, chief U.S. market analyst at Bank of America Inc.’s Merrill Lynch unit.

“Crude has been building a wide, positive base over the past couple of months,” said Bartels, ranked second in a rating of technical analysts by Institutional Investor magazine last year. “Our target is between $70 and $80. Looking at the whole move, that’s a pretty aggressive retracement.”

A rise to $76.28 a barrel in New York would be a 38.2 percent recovery of the slump from July’s record of $147.27. The 38.2 percent threshold comes from the ratio between numbers in the Fibonacci sequence. The ratio, sometimes known as the golden mean, is used to find points of support or resistance as prices retrace rallies or declines between previous high and lows.Oil’s average price over 50 days remained above its 100-day mean for a fourth day today, having broken through on April 8 for the first time since September.

“Things like the 50-day moving average crossing the 100 show the market’s ability to rise from this base, to around $60 to $65 in coming months,” Bartels, said in a phone interview from New York, declining to give a more specific time frame. “We expect after a move to $70 to $80, then crude could come back and test the $35 level.”Oil for May delivery traded at $49.80 a barrel on the New York Mercantile Exchange today. Crude crashed 78 percent from $147.27 on July 11 to $32.40 on Dec. 19.

Technical analysts at BNP Paribas SA and Credit Suisse Group AG have forecast a rally above $68 a barrel as prices repeat an $18 gain made between December and January. In contrast, Societe Generale SA said on March 31 that charts suggest a crash to $28 a barrel in the second quarter.Bartels predicted on March 23 that the Standard & Poor’s 500 stock market index may rise to 1,055. Since then, the U.S. equity benchmark has gained 12 percent to 858.73.