Crude Oil: How Far Will It Fall?

Contrahour has a very simple chart up showing the technical weakness crude is exhibiting. The chart implies that a re-test of the $100 is imminent. Notice how on the most recent test of $120 that oil is not springing off support as it should. Instead, it is lingering about, suggesting it wants to trade even lower.

In early June, when hitting the same support level, buyers rushed in and crude soared right back up where it came from. That is not the case this time around. This should theoretically be bullish for the market as a whole. But, we all know how the market loves to surprise us.

click to enlarge

Comments

[mangolfer:]

might be a little support at $110 too based on the chart....

2008 Aug 07 05:55 AM

[CLH:]

Oil will probably drop to $100 fairly quickly but then stop for some time. The final price will be $50-60. Both tops and bottoms are always over shot.

Keep your SUV. You will be sorry if you sell and buy a little unsafe tin can. Remember the 1980s ---oil dropped over 50%.

2008 Aug 07 07:02 AM

[john s. gordon:]

1985 - a one time event, opec members were cheating on their quotas & mr. saudi opened the valves to enforce discipline. the drop in $/bbl devastated the houston economy, there were refugees from TX relocating all over the country.
> jack

2008 Aug 07 08:07 AM

[scfranklin94:]

CLH - you're dreaming; most of the tar sands production needs $60 to $65/bbl - in Canada - to break even. Same is true with many difficult to drill formations; i.e. the Bakken Shale. If prices fall that far, demand will ramp right back up and year-on-year production will decline.

2008 Aug 07 08:57 AM

[Ishortyou:]

Nah, we just fed up with dark age fossil fuel we like new age tech electrical or hydrogen-water tech. Fossil is such a headache and too polluting.

2008 Aug 07 09:03 AM

[dieuwer:]

Ignore CLH, that one is a paid basher. Looks at his contributions so far: seekingalpha.com/user/...

2008 Aug 07 11:00 AM

[Jimbo:]

I support the statements of scFranklin94. The era of cheap oil is gone for ever. In 1985 there existed a true spare capacity from conventional fields. But those fields are in terminal decline. Any new production must come from heavy oil, tar sands, and very deep under water deposits. If the retail price per barrel falls too far, production will just shut down. Oil costs will force us to conserve, economize, and seek alternatives. I installed a solar water heater in my home (Florida) in 2002. We are saving at least $50.00 per month in electricity.I planned to put a 4.2 KW solar electric system on our roof but my wife complained that we would not live long enough to amortize the cost. But all utilities in Florida are asking for increases in rates to pay for planned expansion involving nuclear and other means. I predict electricity rates will track the price of oil and other fuels.

2008 Aug 07 11:26 AM

[Old Wizard:]

Isn't this the same old game? Prices are too high, the US starts to seriously consider drilling into its own off-sure sources and to implement alternative renewable energy sources and then OPEC increases oil production. This time we should ignore the decrease and go ahead with a comprehensive energy plan that decreases our need to import at least 10 m barrels of oil/day in 10 years and at least 5 million barrels/day in 5 years, if for no other reason then to reduce our dependency on some of the countries who don't like us and to reduce the negative cash flow out of this country.

2008 Aug 07 11:27 AM

[The Proclaimer:]

With Biofuels made from algae capable of 20,000 gal/acre per year (Glen Kertz) turning a profit at $70 a barrel and the truth comming out about "The energy NON Crissis", Lindsay Williams, AND Clean Coal Technology (any day now). Crude will be below $70 a barrel just to keep the Biofuel out of the market. There will be no stopping KING COAL!

2008 Aug 07 08:50 PM

[Timothy Stolz:]

No one has considered the potential for political consequences in the pricing of oil, especially right around election day, in the US. If McCain wins I think Israel would "stand down" and let him work on Iran when he gets into office. If Obama wins, I would anticipate a maverick action against Iran by Israel while Bush is still in the White House.
Now, I'm only throwing that out there.....what do you think would happen? $200 a barrel overnight would be my guess.

2008 Aug 07 09:28 PM

[Kezorm:]

Several large oil exporters have threatened to cut production to support crude prices if they fall too far. Why should any exporter sell many barrels at low prices when they can sell fewer, for higher prices while also extending the productive life of their reserves and increasing the ultimate yield?

2008 Aug 07 10:49 PM

[jjason:]

Go To:

www.stopoilspeculation.../

If you want to see lower oil prices then sign the petition.

2008 Aug 08 08:25 AM

[The Proclaimer:]

I agree Kezorm, what the powers that be don't get is this is their last hurrah as far as high crude prices go. As soon as the Clean Coal technology comes into play the powers that be can squeeze all they want to. Let them try to drive up the price of crude. Mean while the Biofuel people will be running through the door to produce thier oil as long as crude is selling above $70. The longer the door is left open the quicker oil will stabilize, I think some where under $100. It is win win for the consumer. All the while the Electric utilities are gearing up to take their bite of the transportation dollar pie (GM and 36 utilties partnered up last month). Looks like a win win for the Electric utilities, solves the off peak load issues and increases sales. Look at it like filling your gas tank when there is plenty of capacity and prices are cheap. When the power companies are displacing gasoline with Coal & Nuclear generated energy, let us see how long the powers that be squeeze the petro hose. From what I have heard some clean coal technology may even reduce the cost of generating electricy. Can't wait to see Big OIL put that into their pipe. The way I see it the more they squeeze the faster they loose their control. Soon they will have to increase their production in order to increase their bottom line. OH YEAH I forgot to mention the benifits to the Enviroment from all of that CLEAN ABUNDANT FOSSIL ENERGY !

2008 Aug 09 03:21 PM

[Kunst:]

Sooner or later, the US must learn to get by on no more than half of the oil we currently consume. Anyone who slides by that fact (such as our two dim-bulb presidential candidates) simply can't be taken seriously.

2008 Aug 10 02:30 AM

[The Proclaimer:]

How can you say that "we have to get by on half of what we currently consume' when the Biofuel people know that they can produce enough fuel from algae (within 5 yrs). One small company using desert land and waste products can meet our needs! There is no way to know just how many companys there are world wide that are planning to produce oil from algae. These sources are renewable. And by the way have you seen the USGS report on energy reserves within the Artic circlle? 90 bln barrels of oil and 1,640 trillion ct of gas. The "must reduce consumption" arguments have lost their foundations.

Wake up! We are about to witness the next major change in the history of Mankind.

2008 Aug 10 05:03 AM

[Kunst:]

I'll believe it when I see it Until then, let's plan for my scenario.

2008 Aug 10 12:41 PM

[The Proclaimer:]

It probably will not follow my senerio, but as sure as you are reading this Clean Coal Technology, not Carbon sequestration, but truly clean near zero emmissions technology is for real.

2008 Aug 10 04:56 PM

[Old Wizard:]

I saw a feature on a start-up that has a closed cycle process for using the organic matter in garbage[ which they claim is over 80% of the volume] in a conversion to gas that is then liquified and can power automobiles.Didn't write the company's name down. Has anybody out there heard of the company?

2008 Aug 11 09:37 AM

[markj:]

who the heck knows?

2008 Aug 28 01:59 PM

[chistletoe:]

all these people who rely on those graphs and lines and jiggles and stuff,
kinda remind me of the gypsies who used to tell your fortune
by looking at tea leaves or the lines on your hand.

Party is over. Oil is selling at the lowest point you will ever see again, and the DOW is at the highest point you will ever see again.
Its fundamental, my dear Watson ....

2008 Aug 07 06:33 AM