Even a die hard oil bull underestimates the strength of crude. I thought we had at least seen an intermediate term top at $135/barrel in late May but I think I'm wrong. The speed at which crude bounced off of the lows this week tells me that this thing is headed for a straight shot to new highs, possibly even $150 in the near term. This is not speculator driven, the specs have reduced positions the last 2 weeks according to the Committment of Traders data, and the commercials were the ones buying. This week has turned out to be a bear trap for the shorts, I don't see anything stopping crude until the move just goes crazy to the upside and there is nothing but air underneath, right now there are too many buyers underneath looking to get in. Crude moving to contango is overblown, that is not bearish, it just means that producers are no longer willing to hedge below spot prices like they were a few months ago. It also tells me that there is demand that is going out many months out, this is not a short term supply demand story, its a long term one.
See, I read this and go "ok, but then why did oil spike up $5 immediately after Trichet announced that the ECB might hike rates next month?" Does Trichet's announcement to hike mean that oil supplies suddenly fell off a cliff, or that demand would spike? To me, it's more a weak dollar story and as soon as he said that, speculators hopped on board because they knew oil would spike.
Trichet's comments were made in the morning, the dollar was weak all day, the crude oil spike happened with about an hour left in the crude oil pit trading session in the afternoon. Crude is up $4+ right now, that's all because of the dollar? Give me a break.
I wouldn't be so quick to call a top here until the market sentiment changes. There is a sort of disbelief among the masses that oil prices are so high, but demand is still strong, and supply is flat. If oil prices were too high, you would be seeing a lot of demand destruction. A 2% decrease in consumption is not enough to keep this bull down. Volatility likes this normally doesn't last long, but crude went down a lot the past few days before this run up in the last 24 hrs.
This has been a massive bear trap with all the 'shorts' getting mangled to fuck. Its better to play each day with a neutral mindset, exploiting all moves available witn an accurate buy & sell signals system. ".. ah bubbling crude.. oil that is .. black gold .. Texas tea"
good luck to you, I have a feeling today is a gap and go day, I don't think traders want to be short over the long weekend with crude at an all time high.
There was a whole lot of news coming out in the afternoon. Including Israelis saying a strike on Iran is now quite definite after Iran press conference stating nuclear power is their right and no one can stop them !