(EnergyAsia, April 12 2010, Monday) — By Darrell Delamaide for Oilprice.com.

Crude oil prices ended last week virtually unchanged from the previous week as optimism about demand warred with trepidation about historically high inventories in both crude oil and gasoline.

The benchmark West Texas Intermediate contract settled at $84.92 a barrel on Friday, April 9, only 5 cents ahead of the previous week’s Thursday close after surging above $87 a barrel early in the week and then declining for three straight sessions.

Bears noted that oil seemed unable to stay above $87 a barrel level, while bulls said that oil had tested the $84 level going down and found resistance.

The contango for oil increased during the week, suggesting continued downward pressure on short-term prices. Contango is when further-dated contracts have higher prices than near contracts. Contango widened to about 60 cents from 40 cents as near-term prices fell at the end of the week.

Analysts also noted that the gasoline crack spread – the difference between a barrel of crude and a barrel of gasoline – declined over the week, indicating soft US demand for gasoline.

US crude oil inventories rose for the 11th straight week and gasoline inventories remained high for the season. Refineries increased capacity utilisation to nearly 85%, giving rise to concerns that US gasoline stocks would remain high if seasonal demand failed to materialise.

Crude oil has gained more than 70% over the past year, outstripping the fundamentals, on speculation that economic recovery would result in an increase in demand.

Energy prices are approaching a crossroads, analysts said. Either demand will in fact start reducing US inventories and prices will head toward $100 a barrel, or inventories will remain at above-average levels and prices could head back in the direction of $75 a barrel.

Continued uncertainty about Greece’s fiscal crisis also dampened oil prices. Fitch downgraded Greek debt to BBB-, the lowest investment-grade rating, increasing the country’s borrowing costs even as it frantically tries to raise money in international capital markets. A Greek default and its knock-on effects in Europe could severely impact economic recovery and reduce demand for oil.