It's that time of year when traders start thinking short oil. Hurricane season is winding down, but more importantly, this fall season looks like we could be headed for a recession. It's still a little dangerous as we could see some of those storms develop into full blown Gulf hurricanes. But the chart looks ready for a reversal, after a failed attempt at taking out the August high and the lower high Friday close. Forward contracts are pricing in a drop to 72 by December, but I think we will head lower. Prices are being held up as much as possible by Opec with the dollar at multi-year lows. I would wait for a failure of 75.18 on a closing basis if you want to play it safe. The October contract terminates on 9/20, some of you might want to use the November contract, which already trades a dollar lower. If we break above 77.50, stay out of the way, as we could see 80. I think that is unlikely, but never say never especially if spot dollar stays below 80.50. Inventories on Wednesday will be key, but the lower dollar is really what is holding prices up. Oil producing countries get paid in dollars, and right now it isn't worth much.
This entry was posted
on Sunday, September 09, 2007 at 9/09/2007 10:46:00 AM.
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