Is this an oil blow off top in the making?

Discussion in 'Commodity Futures' started by Ivanovich, Apr 18, 2008.

  1. Oil future spiked over $2 and are going up like a rocket despite significant gains in the dollar.

    Anyone know what's going on?
  2. Funny, I was just starting a new thread with the same question about that parabolic move on oil.

    I'm short oil now, just 1 CL contract at 114 with stop at 117.8... With the move on Euro, and gold, I find it strange and mind boggling oil recovered all it's losses today and even made it way deep into the green.
  3. Perhaps it's the so called "dumb money"? Has to be significant up move so the big boys can short it...

    Fed stances are turning hawkish, indicating the cuts are over.

    I don't get it. But then again, I don't trade oil.
  4. PaulRon


    i think you're right ivan... very strong dollar today
  5. Anyone a bit more familiar with energy futures care to comment on what they think?
  6. More demand for oil in Mideast hikes prices
    Mideast oil producers increasingly consume their own oil to fuel their fast-growing economies, driving up oil prices.
    Posted on Fri, Apr. 18, 2008
    WASHINGTON -- Middle Eastern oil-producing nations are behind today's record high oil prices, but not for the reason you might think. Taken together, oil-rich nations represent a bloc of fast-growing economies that are now sucking up new energy supplies almost as fast as they're coming to market.
    Together, the six nations that make up the Gulf Cooperation Council (GCC) are now consuming about as much oil as China, whose thirst for oil frequently gets the blame for tight global supplies.

    These GCC countries -- Saudi Arabia, Kuwait, Oman, Qatar, Bahrain and the United Arab Emirates -- have grown at a 7 percent annual clip since 2002. They boast a per-citizen income -- $19,000 -- that is three times China's. Demand for oil in the Middle East has risen by almost 6 percent annually since 2004.

    Here's what that means for Americans: The Bush administration has leaned on the Saudi Arabian monarchy to step up oil production, but much of the output will stay in the Persian Gulf region to power newly dynamic economies. That means global demand for oil will continue to strain supply. Oil prices are likely to stay high.

    For the last three summers, Americans have paid more at the gas pump in part because of this spike in Middle Eastern demand for oil. These increasingly affluent nations have seen enormous summer spikes in demand for air conditioning. A full third of electricity generation in the region comes from oil-fired power plants.


    Because these countries produce oil, they often sell its byproducts at a subsidized discount. Oman sells its oil-fired electricity at a 40 percent discount.

    Throughout the Persian Gulf states, consumers enjoy steep subsidies of more than $1.44 a gallon at the gas pump.

    ''Rising income plus cheaper fuel equals subsidized gasoline and more cars,'' said Adam Robinson, an energy analyst with investment bank Lehman Brothers. He provided a wide array of data on Middle East demand trends at an April 7 conference in Washington about the world energy outlook.

    Another spike in oil demand is expected in the Middle East this summer, Robinson said. This spike is one reason why the U.S. Energy Information Administration last week projected record-high gasoline prices for American motorists throughout this summer -- even if we drive less, as expected.


    Lehman Brothers forecasts global oil consumption will grow by 1.1 million barrels per day this year. China and the Middle East each will account for about one-third of the increase. The Middle East should see consumption grow by 350,000 barrels per day, Lehman projects.

    Signs abound of the growing clout of Middle Eastern oil economies. An expansion in Dubai, part of the United Arab Emirates, will create the world's largest airport, bigger than London's Heathrow, by 2017. It'll include a cargo hub three times larger than the cargo headquarters of FedEx in Memphis.

    Also in the United Arab Emirates, competing projects each claim to be building the world's largest aluminum smelter, fired by natural gas.

    Saudi Arabia is investing more than $100 billion in petrochemical facilities that will allow it to move from today's 4 percent of global production to 12 percent by 2010. The Saudi monarchy has been ramping up its oil-production capacity from about 9 million barrels a day in 2006 to at least 12 million barrels per day by the end of next year.

    The National Bank of Kuwait projects that a staggering $1.75 trillion will be spent on regional development, industry and energy projects in the Persian Gulf states over the next six years.

    Middle East oil exporters are increasingly recycling their petrodollars into their own economies. The value of the U.S. debt and securities held by Mideast oil-exporting nations stood at about $125 billion in June 2007, according to the Treasury Department. That's just a bit more than the $121 billion in U.S. financial investments they held in June 2004, when the run-up in oil prices began. They used to invest their profits largely here. Now they're keeping them home.

    ''It starts to create unbelievably really serious demand. And then every time you jump 1 million barrels per day of energy demand in the Middle East, your supply [for export] falls by 1 million barrels per day,'' said Matthew Simmons, an investment banker specializing in oil.


    The tight balance between global supply and demand has allowed financial markets to run up the price of oil -- now trading above $115 a barrel -- on concerns that an accident or international incident could trigger shortages.

    If there's a bright spot for U.S. motorists, it's that the high oil prices have triggered a wave of new energy investment around the globe that eventually will increase supplies and should lower prices.

    ''I've never seen so much investment going into all parts of the energy spectrum -- from renewables and alternatives to conventional energy,'' said Daniel Yergin, an oil historian. ``And I think we need a sustained high level of energy research and development to really build resilience. For the foreseeable future, we're going to be a significant importer of energy.''

    Lehman's Robinson expects that after this summer, oil prices may fall back as more supplies become available. He believes prices could fall by $30 a barrel, which could return gasoline to $2.50 a gallon or less.
  7. It could be an "outside down" day in the making on the charts for today or Monday. Stay tuned!
  8. A good article. But are you saying that article caused the spike today in lieu of the dollar's gains?
  9. You must not be a technical trader.
    Look at a crude oil chart lately?
  10. I just didn't find any other really new news.
    #10     Apr 18, 2008