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What is it all about?

Mon, Jun 2 2008, 14:35 GMT
by Phil Flynn

Alaron

It’s not the dollar and it's not speculation. It is supply and demand. According to Hank Paulson, speaking on oil in Dubai, it's all about supply and demand. He also says there is no quick fix for oil prices. Wow shock! There are no quick fixes! No kidding.

But I think that although demand and supply is the main issue, you should not discount the impact of the dollar. Yes, we have tight supply and growing demand but I don’t care what you say, if the dollar was at an all time high you would not have oil above $100.00 a barrel.

Peak oil from Russia with love. Is Russia’s new President, Dmitry Medvedev, going to be friendly to foreign oil interests. Well in case you missed it, last week's Wall Street Journal reported on growing tension between BP’s partners in Russian oil ventures TNK-BP. The Journal reported that Russia sought the ouster of the unit’s CEO Robert Dudley. BP refused saying that the escalating dispute could shape BP’s future and the role of foreign companies under Russia’s new president. The Wall Street Journal says that in February, 2003 BP announced the new Russian joint venture. Then under pressure in 2007, BP agreed to sell a big stake in a big Siberian gas field to Gazprom and form a global joint venture with the Russian gas giant. Then in 2008 the Russian security services raided BP offices and questioned employees. They arrested low level employees on espionage charges. If that wasn’t enough, the Russian government also said they were investigating BP for Tax evasion. The same trumped up charge that sank YUKO’s. BP says that a Siberian court, acting on the request of a small Moscow brokerage, has issued an injunction preventing BP specialists from working in Russia. On May 20, Russian security services searched BP’s Moscow headquarters and finally the CEO of TNK-BP had had enough and says publicly that TNK-BP’s Russian and British shareholders have disagreements. This did not sit well with the Russian shareholders who slammed him for going public. The Russian partners then demanded that Dudley be removed. In the meantime the question arises is how safe is foreign investment in Russia? And is it any wonder that Russia’s oil production is struggling.

The commitment of traders report, according to Bloomberg News, showed that hedge funds and speculators reduced bets on higher oil prices by 80% since July. The report showed that spec longs fell to 25,867 from 127,491 in late July.

Funds dropping out of oil are a sign that they see the writing on the wall on the bull oil market. The signs that demand is falling is forcing funds to seek better profits elsewhere. Keep an eye on the $125.00 a barrel area. A close below it could open up the selling floodgates.

Don’t forget to get your free trial to alaronenergies.com and to get on the Phil Flynn Energy Blast! Also see me today with David Asmen and Liz Clamen on the Fox Business network. And call me at 800-935-6487 to open your trading account!

We're short July crude oil from apprx 13200 - lower stop 13550.

Sell July RBOB at 34000 - stop 34300.

Buy July heating oil at 35500 - stop 35300.

Buy July natural gas at 1100 - stop 1070.

Have GREAT day!

Published on  Mon, Jun 2 2008, 14:38 GMT