Can the Greece-inspired rally in oil prices last?

Oil prices staged a relief rally early Monday after Greek elections on Sunday yielded what's being perceived as a market-friendly outcome though some warned the bounce in risk-assets may not last as questions persisted over how long any coalition government may last.

Parties committed to a bailout saving Greece from bankruptcy were set to win a slim parliamentary majority on Sunday, beating radical leftists who reject the terms of the lifeline and bringing relief to a world braced for fresh financial turmoil.

The election result looked likely to yield a coalition government led by conservative New Democracy but leaves an emboldened SYRIZA bloc to rally angry opposition in the streets to the punishing terms of the bailout, the news agency said.
"This is a good outcome for now," said Ian Bremmer, President and Founder of Eurasia Group, a global political risk research and consulting firm, told 'Asia Squawk Box' on Monday. Greece has shown that "they're capable of further can kicking" and he warned that a coalition government may last six to 12 months.
London Brent crude rose over USD 1 to USD 98.94 a barrel, while US light, sweet crude was trading USD 1.25 up at USD 85.28 a barrel in early Asia.
"The pro-bailout vote in Greece has ignited a relief rally, which in the very near term will meet resistance at USD 87 in WTI (West Texas Intermediate, the benchmark grade for US crude futures) and around USD 100 for the European contract," ANZ analysts including Mark Pervan and Nicholas Trevethan.
"However, we could see prices press another 5% higher in the days to come," ANZ said. But uncertainty over Europe and weaker-than-expected US data will keep markets on edge, ANZ warned.
Oil prices are expected to remain little changed this week, with US crude futures seen oscillating in a tight range around USD 84 a barrel, as investors await the outcome of Greece`s weekend elections.
A victory by left-wing Syriza party may prove the catalyst for the debt-laden nation to exit the euro zone, according to CNBC's weekly survey of oil market sentiment before Greeks went to the polls on Sunday.
"On the front of everyone`s mind is Greece but I do not anticipate any real resolution following the election results," said Kirk Howell, chief operating officer of SunGard`s Kiodex, who has a "neutral" call for this week. "Whatever party wins will likely negotiate a new agreement with the Eurozone, regardless of the rhetoric up to the election."
Oil has consolidated around USD 84 over the last two weeks, Howell noted, adding: "Given the complexity of coming events, I think it's prudent to wait for price to break above USD 86.60 or below USD 81 to establish a direction."
This week's poll suggested most market participants were non-committal. Few are inclined to make any directional bets until they get greater clarity on the Greek election results while those that were willing to make a call expected prices to slide.
"Prices will remain somewhat sluggish until we get some kind of clear message from Europe, if we ever do," said Keven Kerr of Kerr Trading International. Five out of the seven respondents in the sample group expect prices to remain steady this week while two believe prices will fall.
Consensus is emerging amongst technical analysts, chart watchers and fundamental analysts alike that a move lower in oil would take prices below USD 80 with the most pessimistic forecasters predicting prices close to USD 75. Fed Focus
A two-day policy-setting meeting by the Federal Reserve's Open Market Committee starting on Tuesday and the Group of 20 leaders at a summit starting on Monday in Mexico will be watched closely for any hints of coordinated action to possibly prevent the banking crisis and sovereign debt strains in Europe from spiraling out of control.
The refrain from most central banks is that they're standing by with more stimulus, if needed but are not likely to release further easing measures imminently.
The European Central Bank "will not do anything until after elections," said David Kotok, chairman and chief investment officer at Cumberland Advisors.

"I've heard one argument that they (the Fed) can extend Twist ('Operation Twist' where the Fed bought USD 400 billion of bonds with maturities of six to 30 years through June, while selling an equal amount of debt maturing in three years or less) and drive the treasury yield a little lower and target a home mortgage interest rate at 3%," Kotok added.

"It might boost housing some more. No clear path. My guess is they use jawboning but minimal policy."
US crude futures recorded a 7-cent loss for the week following a 1% gain in the week to June 8. The July contract on the New York Mercantile Exchange settled at USD 84.03 a barrel on Friday, rising 12 cents, or 0.14%.
The stresses in the euro zone had a more pronounced impact on Brent crude futures with the August contract on the InterContinentalExchange, or ICE, last week dropping USD 1.86, or 1.87%, after gaining 1% in the week to June 8.
Daryl Guppy, CEO of Guppytraders.com said the charts suggested a bearish tone but prices could stage technical rebound off support near USD 78 if it holds.
Dhiren Sarin, chief technical strategist for Asia-Pac at Barclays Capital also pegged levels around USD 78 as key support.
"The greater bearish backdrop remains undamaged and we would look to sell against the USD 87 area for a move through USD 81, a break below which would suggest a target at USD 78.90." But Sarin said a "pause in the down move for WTI crude" was a possibility as the technical charts signaled "a momentum warning (divergence)" suggested reversal.
Sandy Jadeja, chief technical analyst at City Index, said the trend remained negative but maintained an upside target at USD 94.15.
ANZ Commodity Research analysts, however, were negative: "In the event of a move lower" for oil, they said, "we see WTI support at USD 81, and then down towards USD 76."
John Kilduff at Again Capital added that if WTI crude breaks USD 81.50, prices could "cascade rapidly" to USD 74.95. By CNBC's Sri Jegarajah Copyright 2011 cnbc.com