Post by Savant on Oct 14, 2004 5:07:52 GMT -5
End-Run within sight for Global Oil Price Surge
The uptrend in Crude Oil and the Energy Complex in general, remains parabolic and with new highs being established in virtually all future months, it doesn't get much stronger than that and at face value does not yet invite shorting. However, in certain Heating Oil contracts, we did make outside days Wednesday and this can often be a sign that the end is nigh.
What is hard to foresee at this point, is whether a spectacular final blowoff will ensue and we end with great drama and wild price swings, or whether this next interim top will be a subtle one that ends with a whimper and perhaps just kind of reverses of its own weight, much like what occurred when the previous highs were established back around August 20 prior to a fairly rapid $7 per barrel price plunge. Compulsive shortsellers could take a shot a shorting CLZ4 at 53.30 stop.
There has been a bubble of sorts burst in the Copper market over the past few days when it experienced one of its worst and steepest price declines in history. Could a similar fate be awaiting the Oil Complex? Definitely cannot be ruled out. It is important to realize that once the sentiment changes in this sector from bullish to bearish, the results could really be lethal to late-to-the-game bulls who have recently bought in and could create stunning losses for longs in general.
It is also important to understand that this is a short squeeze just like most all of the others that often power stocks to dizzying heights and then ultimately fall in on themselves often with death spiral consequences, very much like what happened back in 2000. Whilst Hedge Funds are getting the credit of driving prices higher, it may not necessarily be because they are so smart and hugely net long. Many Hedge Funds, institutions and professional traders have probably been caught short this market and the abject fear of being caught short in one of the most powerful and unpredictable parabolic upmoves ever, is definitely testing their metal and is panicking many to buy back their positions at any price.
Some time back, we posed the idea that the architects of the Strategic Petroleum Reserves acquisition program may have been tempted to short forward months against their near month and physical buy program to profit from what back then looked like an overpriced market heading lower...
Since that false peak occurred back at around $35 per barrel or so, any temptation to scalp some extra gains from an anticipated downturn may have potentially backfired beyond anyone's imagination to the tune of $20 per barrel, because those so called forward months have accelerated higher, potentially even more vigorously than the cash market, indicating that attempts to sell short or hedge into forward months has been a dangerously losing strategy.
It wasn't so long ago that Crude Oil was around $20 or so and now we are at a previously almost unthinkable $35 higher.
The first bothersome part of this is, given the power of the continually unfolding parabolic power curve to date, that there is a fairly big risk of an out of control blowoff unfolding that would essentially create some kind of truly incredible upward price spike, not unlike what happened to Natural Gas on February 25, 2003 or even Gold and Silver back in 1980.
Could there be something out there that could be the final fundamental event to provoke such a blow-off move? Definitely.
As we commented before in outlining our Perfect Oil Storm theory scenario, we pointed out the market's uncanny ability to foresee impactful events or bad news ahead of time and the bad news surrounding Oil supplies remains inordinately bullish for Oil, at least up until yesterday, when the market reacted violently to news of an oil pipeline explosion in Vera Cruz, Mexico.
The other bothersome part of this equation is the US markets and to some extent Global markets have started to get the jitters in recent days and the sentiment has clearly changed to cautiously negative at least for the time being. We did in fact reason that October might start off strong then go weak mid-month and perhaps rally strongly going into the end of the month and into the elections, if the outcome Wall Street is looking for looks more likely by month's end, not as now.
Is there something out there worrying stockmarkets? I would say yes. And is that worry translating from the Oil markets to businesses worldwide and permeating throughout a myriad of different investing areas. The answer again has to be a major yes and is probably causing Governments to increasingly worry about their own vulnerabilities in terms of future oil supplies.
1970's Style Hoarding on an International Scale
Could this be the 70's all over again except instead of citizens and neighbors hoarding gas, this time around it will be the Governments of the world queue jumping to create their own contingency petroleum reserves. Back in the 70's at the height of the energy crisis, with long gas lines, people were installing their own gasoline storage tanks in their own back yards. Now comes the news that China is building a 100 Billion barrel Strategic Petroleum Reserve capacity.
Will Euroland be next? All these things are conspiring to drive Energy prices to new records. Back in the 70's, by the time home based gas station installations were peaking, the crisis was already over and things then got back to normal.
In spite of all of the current anxiety, it is useful to remind ourselves what the infamous Saudi Oil Minister of that era was heard to declare: "That the World will not stop using Oil because we run out of it, but because we will find alternatives".
That statement just became a little truer as of yesterday with the following extremely encouraging news: Numerous Fuel Cell breakthroughs appear to be either happening or are on the horizon and since "Necessity is the mother of invention", this trend is likely to accelerate as a consequence of current events. This may be a truly outlandish idea, but back in the early 1970's ahead of early oil price hikes the price of crude was in low single digits. That was 30 years before the turn of the Millennium. It would not be unreasonable to venture to suggest that 30 years beyond the turn of the Millennium, Oil could once again be in single digits back below $10 per barrel, if the World can get its alternative energy act together by then. A lot can happen in 25 years and there are numerous reasons why this not only should happen, it has to. From an atmospheric standpoint, we have to move to Ultra Clean Fuels with near zero contamination such as can be derived from Coal wherein the US reigns supreme as the "Saudi Arabia of Coal" with 400 years estimated reserves. Regrettably, the three year lead time since 9/11, of starting such a program as a kind of Manhattan Project type alternative energy quest, has already been lost and now the US and the World at large is getting a major wake-up call to start doing something about it. With the same dedication, will and ingenuity it took to send a man to the moon 35 years ago, surely, the World can solve this hydrocarbon problem that exists today. With the insanity of ever larger SUV's, Hummers, RUV's and now Supersized Trucks and other such obscene Road Vehicles that get as little as 5 miles to the gallon, we are paying the price and recklessly jeopardizing the health and wellbeing of future generations and holding ourselves hostage to energy.
We have stated for a while that we feel a tech upturn lies directly ahead and the encouraging news of the alleviation of Intel's inventory problems which we also felt would inevitably be worked out and the somewhat better than expected Intel results bodes well as a harbinger of things to come. Apple's stunning results and Yahoo's impressive numbers on the heels of the encouraging Intel news is setting up a positive trend omen, as is Ebay potential to exceed $100 per share.
Have a Great Thursday
Trade Well
Savant
The uptrend in Crude Oil and the Energy Complex in general, remains parabolic and with new highs being established in virtually all future months, it doesn't get much stronger than that and at face value does not yet invite shorting. However, in certain Heating Oil contracts, we did make outside days Wednesday and this can often be a sign that the end is nigh.
What is hard to foresee at this point, is whether a spectacular final blowoff will ensue and we end with great drama and wild price swings, or whether this next interim top will be a subtle one that ends with a whimper and perhaps just kind of reverses of its own weight, much like what occurred when the previous highs were established back around August 20 prior to a fairly rapid $7 per barrel price plunge. Compulsive shortsellers could take a shot a shorting CLZ4 at 53.30 stop.
There has been a bubble of sorts burst in the Copper market over the past few days when it experienced one of its worst and steepest price declines in history. Could a similar fate be awaiting the Oil Complex? Definitely cannot be ruled out. It is important to realize that once the sentiment changes in this sector from bullish to bearish, the results could really be lethal to late-to-the-game bulls who have recently bought in and could create stunning losses for longs in general.
It is also important to understand that this is a short squeeze just like most all of the others that often power stocks to dizzying heights and then ultimately fall in on themselves often with death spiral consequences, very much like what happened back in 2000. Whilst Hedge Funds are getting the credit of driving prices higher, it may not necessarily be because they are so smart and hugely net long. Many Hedge Funds, institutions and professional traders have probably been caught short this market and the abject fear of being caught short in one of the most powerful and unpredictable parabolic upmoves ever, is definitely testing their metal and is panicking many to buy back their positions at any price.
Some time back, we posed the idea that the architects of the Strategic Petroleum Reserves acquisition program may have been tempted to short forward months against their near month and physical buy program to profit from what back then looked like an overpriced market heading lower...
Since that false peak occurred back at around $35 per barrel or so, any temptation to scalp some extra gains from an anticipated downturn may have potentially backfired beyond anyone's imagination to the tune of $20 per barrel, because those so called forward months have accelerated higher, potentially even more vigorously than the cash market, indicating that attempts to sell short or hedge into forward months has been a dangerously losing strategy.
It wasn't so long ago that Crude Oil was around $20 or so and now we are at a previously almost unthinkable $35 higher.
The first bothersome part of this is, given the power of the continually unfolding parabolic power curve to date, that there is a fairly big risk of an out of control blowoff unfolding that would essentially create some kind of truly incredible upward price spike, not unlike what happened to Natural Gas on February 25, 2003 or even Gold and Silver back in 1980.
Could there be something out there that could be the final fundamental event to provoke such a blow-off move? Definitely.
As we commented before in outlining our Perfect Oil Storm theory scenario, we pointed out the market's uncanny ability to foresee impactful events or bad news ahead of time and the bad news surrounding Oil supplies remains inordinately bullish for Oil, at least up until yesterday, when the market reacted violently to news of an oil pipeline explosion in Vera Cruz, Mexico.
The other bothersome part of this equation is the US markets and to some extent Global markets have started to get the jitters in recent days and the sentiment has clearly changed to cautiously negative at least for the time being. We did in fact reason that October might start off strong then go weak mid-month and perhaps rally strongly going into the end of the month and into the elections, if the outcome Wall Street is looking for looks more likely by month's end, not as now.
Is there something out there worrying stockmarkets? I would say yes. And is that worry translating from the Oil markets to businesses worldwide and permeating throughout a myriad of different investing areas. The answer again has to be a major yes and is probably causing Governments to increasingly worry about their own vulnerabilities in terms of future oil supplies.
1970's Style Hoarding on an International Scale
Could this be the 70's all over again except instead of citizens and neighbors hoarding gas, this time around it will be the Governments of the world queue jumping to create their own contingency petroleum reserves. Back in the 70's at the height of the energy crisis, with long gas lines, people were installing their own gasoline storage tanks in their own back yards. Now comes the news that China is building a 100 Billion barrel Strategic Petroleum Reserve capacity.
Will Euroland be next? All these things are conspiring to drive Energy prices to new records. Back in the 70's, by the time home based gas station installations were peaking, the crisis was already over and things then got back to normal.
In spite of all of the current anxiety, it is useful to remind ourselves what the infamous Saudi Oil Minister of that era was heard to declare: "That the World will not stop using Oil because we run out of it, but because we will find alternatives".
That statement just became a little truer as of yesterday with the following extremely encouraging news: Numerous Fuel Cell breakthroughs appear to be either happening or are on the horizon and since "Necessity is the mother of invention", this trend is likely to accelerate as a consequence of current events. This may be a truly outlandish idea, but back in the early 1970's ahead of early oil price hikes the price of crude was in low single digits. That was 30 years before the turn of the Millennium. It would not be unreasonable to venture to suggest that 30 years beyond the turn of the Millennium, Oil could once again be in single digits back below $10 per barrel, if the World can get its alternative energy act together by then. A lot can happen in 25 years and there are numerous reasons why this not only should happen, it has to. From an atmospheric standpoint, we have to move to Ultra Clean Fuels with near zero contamination such as can be derived from Coal wherein the US reigns supreme as the "Saudi Arabia of Coal" with 400 years estimated reserves. Regrettably, the three year lead time since 9/11, of starting such a program as a kind of Manhattan Project type alternative energy quest, has already been lost and now the US and the World at large is getting a major wake-up call to start doing something about it. With the same dedication, will and ingenuity it took to send a man to the moon 35 years ago, surely, the World can solve this hydrocarbon problem that exists today. With the insanity of ever larger SUV's, Hummers, RUV's and now Supersized Trucks and other such obscene Road Vehicles that get as little as 5 miles to the gallon, we are paying the price and recklessly jeopardizing the health and wellbeing of future generations and holding ourselves hostage to energy.
We have stated for a while that we feel a tech upturn lies directly ahead and the encouraging news of the alleviation of Intel's inventory problems which we also felt would inevitably be worked out and the somewhat better than expected Intel results bodes well as a harbinger of things to come. Apple's stunning results and Yahoo's impressive numbers on the heels of the encouraging Intel news is setting up a positive trend omen, as is Ebay potential to exceed $100 per share.
Have a Great Thursday
Trade Well
Savant
