Bulls get up off the mat for one last round! Just when you thought the battered bulls were down for the count in the quest to hit $100 barrel oil before the options expired they come back with a strong rally to the upside. It the aftermath of the selling bloodbath option expiration the market rebounded as traders covered shots and bargain hunters tried to capitalize on a short term oversold condition. Yet the last best hope for $100 a barrel in 2007 may come today in the form of the delayed weekly inventory report which by my best estimate could be a bearish surprise as a surge of imports and returning Mexican production might find their way into this week numbers. The street is looking for draws across the board so and increase in supply in any category should resume the sell-off unless one of the categories is wildly bullish. Gas Demand was down 1% on the MasterCard Spending Pulse Report. The report said that demand at the pump was d own 1.2% year over tear
Of Course what could also delay one hundred dollar barrel oil is the value of the dollar. As bearish as the Chart looks it is starting to look like more of a bargain compared to other currencies. The Bush Administration has been talking up the dollar and the Japanese Prime Minister has warned Yen buying speculators to beware so it’s possible that the dollar could rebound and stabilize. That of course will reduce buying in oil and the value of oil should fall a little...
Of Course OPEC is not in a hurry to raise production. OPEC rebuffed a request from Energy Secretary Samuel Bodman to increase production. Of course I seem to remember that President Bush criticized the Clinton Administration and then Secretary of Energy Bill Richardson for asking OPEC to raise production. I believe that the President said that it was unseemly for the US to beg the cartel for oil. It looks like oil diplomacy has adjusted to $90 plus oil and no begging is more dignified.
Of Course our friends in the OPEC cartel are promising to invest $150 billion dollars to increase production capacity yet warns that the increase in costs in materials and the weak dollar has increased operating costs by 55%. OPEC though has also dropped hints that if we start to lower consumption of oil they may not invest in rasing capacity at all! Should we start to grovel now or should we wait?
NYMEX Direct in association with Dow Jones says that “In Riyadh, the de facto leader of OPEC, Saudi Arabian oil minister Ali Naimi, argued strenuously against “the pessimists,” who he said have driven up prices by predicting supply shortages as demand in emerging market soars.” Of course Mr. Naimi has too realize that if the pessimists as he calls them didn’t run up the price then demand would continue to soar and we might see shortages. Of course I would say the oil bulls are optimists because to be bullish oil you have to optimistic about the economic outlook. If you were a pessimist you would be short.
Well I want to be short at least in the short term but is still a long term raging bull. But one must head to the ebbs and flows of the market.
Dow Jones reports that it will trim its global oil demand outlook by about 50,000 to 100,000 barrels a day Trilby Lundberg the goddess of gas and her firm the Lundberg survey have released a report called ““Speculators” Message the fundamentals.” Crude Breaks the March 1981 price record.
Trilby asks “is it the dollar’s weakness” [that’s driving the oil] Yes, but to only a small degree. Is it speculators in the trading pits, running amok ignoring supply and demand? No. Is it peak oil or shrinking supply? No. [no?]. No!
Trilby in her report says that they explored the support for high oil prices and set the record straight on the historical inflation-adjusted price broken back on October 29th 2007. As far as specs Trilby says that “there is much concern and noise about why oil prices have been spiking of late, and why they have not punctured world oil demand. It’s not the weak dollar, Its not short supply. It’s not crazed gamblers having nightmares about daily headlines in oil producing regions. The Culprit is relentlessly strong energy demand. (Oh darn I had this picture in my head of a crazed gambler for a minute.) A great report if you get to read it.
Dow Jones reports that BP said it had made another major natural gas discovery in its Shah Deniz field in Azerbaijan. The discovery, which paves the way for a second phase of development of the field, is another sign of relief as the British oil giant moves beyond a string of US problems.
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Buy January Crude at 8460 stop 8260
Long Dec heating oil from apprx 25500 stop 24500
Short December RBOB from apprx 24600 stopped apprx 23600!!
Buy January RBOB at 23200 stop 23000
Buy January Nat gas at 80800 stop 797
