Part of the reason for today's decline wasnt just the weather. If the weather is warm in the northeast, does that mean everyone stops using oil? The big reason was that hedge funds had loaded up on contracts in late December expecting the historical rise in the oil pit. They most likely dumped those contracts today. It settled right at 55.61 on my screen. There are two things that could happen from here. It could create a spectacular V-Bottom on the chart or its going much lower. Any takers want to make a guess? I wont hold you to it, promise.
Heating oil rarely exceeds 4-5% of total US oil consumption, if I read the stats correctly from the DEA. I can't see how a dip in heating oil consumption in the United States, where demand is decreasing YOY as oil burning furnaces are being replaced by gas, can cause the global price of oil to drop 5% within a week It's warm here in the Northeast, and the financial press needs to write stories every day, thus, a cause and effect is invented between the two phenomena of weather and oil prices. Ignore the financial press when they say nonsense like: "Unease over inflation expectations caused traders to sell stocks today......" Pay attention when they report facts. Oil dropped. That's a fact. The Weather is unseasonably warm, that's a fact. The weather motivated sellers, that's an opinion.
Heating Oil DEMAND appears to be running anywhere from 20-30% below normal for most of the last 5 weeks. Out of all of the products, heating oil looks to be the weakest by far. In fact, after yesterday's break below $1.59 you really can't see anything on the charts until the $1.42 level. Meanwhile, refining margins are getting whacked across the country ( as evidenced by COP and their 4th quarter warning today ). And while margins appear to be collapsing across the country, the West Coast continues to defy gravity, where they have actually increased a buck or so this week to around $22.00+
when oil was back to 63 i was thinking it was going to go much lower to at least 50/48 if we get a recession starting sometime in 2007 my guess is 40 but i think we see 50 no matter what
bloomberg survey shows most number of bears since last sept in crude for next week ... might lead to a short term bounce esp if speculation continues that OPEC will defend the lower $50 range in crude oil
Swing Trading to Position Trading: Late February - Early March Day Trading: Look for any bullish pattern signal that occurs within the range of a prior white hammer line that had a long lower shadow. Rising volatility will will be hints (clues) to start looking for bullish pattern signals. Don't get greedy on day trading profits on those Long positions. Take profits as soon as profit targets are reached because currently the bears are in control and have a good chance to continue doing such for the remainder of the month. Above commentary for Crude Oil and Heating Oil. Mark