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Iranian Bluster!

Mon, Jul 28 2008, 13:27 GMT
by Phil Flynn

Alaron

Oil up on Iran bluster. How many centrifuges does it take to rally an oversold oil market? The answer is 6000, the amount President Mahmoud Ahmadinejad claims to have.

Oil traders decided that it might be fun to worry about this as oil is due for a technical bounce. And come on, it has been almost a week since traders were worried about Iran. It's about time.

My buddy, the Princess of Petroleum, has good news! According to Trilby Lundberg and her famous Lundberg Survey, gasoline prices have fallen below $4 a gallon! Oh joy! Trilby puts the national average at $3.996 a gallon! That is the lowest level since May 16. Ah the good old days! Anybody want to buy an SUV?

Why are prices falling? Well because in part demand is falling. That is a good thing, right? Well that is unless you are the government counting on those taxes. Today’s Wall Street Journal warns in a headline that, “Funds for Highways Plummet as Drivers Cut Gasoline Use." The Wall Street says that, “an unprecedented cutback in driving is slashing the funds available to rebuild the nation’s aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting strain is touching off a political battle over government priorities in a new era of expensive oil.” The WSJ says that in, “A report to be released Monday by the Transportation Department shows that over the past seven months, Americans have reduced their driving by more than 40 billion miles. Because of high gasoline prices, they drove 3.7% fewer miles in May than they did a year earlier, more than double the 1.8% drop-off seen in April.”

Another softening demands early warning! Yemen crude oil is being sold at a discount for the first time in 20 months. That may come in handy if you happen to be shopping for crude in Yemen this week.

Dow-Jones reported that the Guardian Newspaper is saying that Nigeria is now producing 1.8 million to 2 million barrels of oil per day, down from a potential output capacity of 3 million barrels a day because of the Niger delta crisis. This of course is one of the strongest fundamental reasons why oil has rallied as far as it has. That lack of sweet crude oil has put increasing pressure on the world oil market. Still the good news is that the Nigerian rebel group MEND (The Movement for the emancipation of the Niger Delta) has not blown anything up lately. It may be because they are making progress on negotiations or it could be they fear that another attack may encourage the UK to send in troops. The UK has felt the brunt of the attacks as the loss of Nigerian production drives up the cost of Brent crude. So much so that Brent that normally trades at a discount is still trading at a premium over WTI.

How sweet it is. Of course we know that Nigerian crude is in such high demand as it is sweet and easy to refine. Many refineries of course need sweet crude as they do not have the ability to refine the heavier oil. Dow Jones reports that Petro China’s Dalian refinery in Northeastern China has begun importing high-sulfur crude. The 401,644 barrel a day refinery received its first high-sulfur cargo of 270,000 metric tons from Kuwait. High-sulfur crude costs less than low-sulfur crude, but requires specialized processing faculties. Petro china is raising its high-sulfur crude processing capacity. This story is a bit bearish as it will take a little pressure off the tight sweet side of the market. So in other words the world has to cut back on its sweets.Late Breaking , the rebels are back at it with reports of another pieline attack.

It's mad, mad, mad Hugo’s end of July super oil sale spectacular!!! But hurry because supplies are limited! Dow Jones News wires reported that Hugo Chavez in a very generous mood has decided to sell Spain 10,000 barrels of oil at the discount price of $100 a barrel. Of course the way oil has been falling lately that might not be such a good price. Hugo is a sharp trader. Or maybe he just is having hard time selling oil at the full price!

As bearish as oil is it looks like technically we are getting ready for a bounce. It's very important that you call for the latest updates. Giving just one entry point and stop a day in these constantly changing market conditions is almost impossible. Before entering any trade call us for the latest we may have changed to trade. Call 800-935-6487 and email me at pflynn@alaon.com to open your account with me! Also do not forget to check me out the Fox Business Network

Also tomorrow once again I will be speaking at the Dow-Jones AIG commodity Index Outlook to be held on the Floor of the CME Group Floor! Make sure to dial in if you cannot be there!

We're short September Crude from apprx 12570 - lower stop to 12670.

Sell September heating oil at 37000 -stop 37300.

Sell September RBOB at 30900 - stop 31500.

Sell August natural gas at 1050 - stop 1070.

Have a GREAT day!

Published on  Mon, Jul 28 2008, 13:28 GMT