Energy / Oil Prices

• Brent Versus WTI - Why so Wide

  We set another record yesterday. This one has me scratching my head. The Brent WTI spread widened to $27.22. That’s never been seen before. There are some partial explanations for this phenomenon. Brent is lighter in grade and justifies a somewhat higher price. But not $25. Another consideration is the increasing flow of crude from the Bakken field in North Dakota. This crude often heads to Cushing, Oklahoma, and therefore creates a supply glut. The WTI price should be lower than Brent based on this. But, one again, $25 seems out of whack. The smart guys up in NDAK are…

• An Update on My Oil Short

  Will everyone please take a look at the chart below for the United States Oil Fund ETF (USO) and tell me if you don’t see a downtrend? Because if it is not there, I want to rush out and take a profit on my October, 2011 $34 puts, which I bought Monday for $2.14. If you do see the downtrend, then I am going to run my short into the obvious downside targets on the chart below. The initial objective, what I call the “easy money target”, kicks in at $33 on the (USO), which will take your $34 puts…

• Crude Oil Analysis for the Week of September 5, 2011

  Crude Oil futures fell on Friday after the U.S. released a dismal jobs report, but still managed to close slightly better for the week. The reaction by traders strongly suggests that a weakening economy will diminish demand, leading to lower energy prices over the near-term. The recent three-week rally appears to have come to an end after the market completed a 50% retracement of the break from 101.00 to 76.15 at 89.90. Technical expectations were for a rally into 88.58 to 91.51, and the market accommodated with very precise rally into this zone. Additional resistance comes in at a downtrending…

• Fundamentals, Speculation, and Oil Prices

  I was in Washington DC last week, arriving right after the earthquake and getting out of town just before Irene, to attend a conference on commodity markets at the Commodity Futures Trading Commission. Here are some of the remarks I made at the conference on the role of speculation and fundamentals in recent oil price movements.Solid line: Price of West Texas Intermediate using near-month NYMEX futures price in dollars per barrel (left scale). Dashed line: Long positions in oil futures contracts of commodity index funds as inferred using the methodology of Masters (2008) (in numbers of contracts or equivalently thousands…

• Crude Oil Analysis for the Week of August 29, 2011

  October Crude Oil posted an inside week but still managed to close higher. The inside pattern often indicates impending volatility because of the compression of the daily ranges. Since the market closed higher, there is a slight bias developing that the volatility will occur following a breakout to the upside. After straddling a down trending Gann angle for the past three weeks at 81.55, the close on the bullish side of this angle indicates the market may attempt to launch a rally into the next downtrending Gann angle at 91.00. Despite the formation of a potentially bullish support base, the…

• Crude Oil Analysis for the Week of August 22, 2011

  October Crude Oil futures fell last week on perceptions that the economic recovery in the U.S. remains sluggish. As the week wore on, disappointing U.S. economic reports continued to reveal a gloomy picture of the economy. From weaker than expected existing home sales to bigger than expected weekly jobless claims, negative news weighed heavily on the confidence in the strength of the economic recovery. Bad economic news out of Europe also contributed to crude oil’s weakness as investors expressed worries about a possible double-dip recession. Of chief concern at this time is the demand picture. Issues were raised about whether…

• Falling Gasoline Supplies Push Crude Oil Futures Higher

  Crude oil futures were up on Wednesday, trading close to a two-week high after industry data showed that U.S. gasoline supplies fell to the lowest level since June 2009 last week, easing concerns over a slowdown in U.S. demand. On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at USD87.89 a barrel during European morning trade, climbing 0.85%.  It earlier rose as much as 0.96% to trade at a daily high of USD87.99 a barrel, just below Monday’s two-week high of USD88.03. The American Petroleum Institute, an industry group, said on Tuesday that U.S.…

• Crude Oil Analysis for the Week of August 15, 2011

  Following a volatile trading week which saw the October Crude Oil futures trade in 13.18% range, the market settled at $85.69, down $1.61 or 1.84%. The week started out with a violent sell-off as market participants reacted to the downgrade of U.S. debt instruments by the S&P Corp. Once it settled down, traders looked to the lingering debt situation in the Euro Zone and the U.S. Federal Reserve for direction. On Tuesday, the Fed announced that it would keep interest rates at near zero until mid-2013. Although there was a short-covering rally about mid-week, traders could not turn the market…

• Oil Prices and the Fall of the Soviet Union

  Back in the 1960s and 1970s, the country that was the “big growth story” was the Soviet Union. Its oil consumption grew by leaps and bounds. Its space program grew; its military program grew; and it became much more industrialized. But then something happened to stop the amazing growth story. The Soviet Union became the Former Soviet Union (FSU) in late 1991, and even before that, oil production and consumption slowed. It seems to me that the FSU changes have been helpful to the rest of the world, in ways we don’t stop to consider, because it helped put off…

• Why Falling Oil Prices are NOT a Reason to Celebrate

  Normally, consumers consider falling oil and gasoline prices to be good news. They have to pay less to fill up their tanks. And if the reason for that is that oil supplies are increasing at a rate faster than demand is increasing, it can indeed be a good situation for consumers, and good for the economy. But here’s the bad news: That is not the case today. Oil prices fell last week to below $90 a barrel, their lowest level in six months. I think oil prices are likely to fall further in the short term, and gasoline prices won’t…