Three Conditions Supporting Short-Term Oil Prices

Conditions Supporting Short-Term Oil Prices: 1) Hurricane Gustav is expected to reach Category 3 status by this Saturday and has the potential to become a major storm in the Gulf of Mexico. It is projected to hit central Louisiana on Sept 2nd before heading northwest to other parts of Texas and Louisiana.

2) Meanwhile, on the geopolitical front, the Jerusalem Post reports that Israel will not allow Iran to achieve nuclear weapons capability and that it will do whatever is necessary to prevent this from occurring.

3) Tensions between Russia and the West over Georgia continue. Reports have emerged that Moscow/Kremlin is prepared to cut oil supplies to Germany and Poland via the Druzbha pipeline in the event of any EU sanctions and NATO naval activity in the Black Sea.

Commentary Analysis: So far, oil prices have remained fairly stable instead of their typical knee jerk reaction to surge higher on such bullish news catalysts. The possibility of global economic slowdown may be balancing some of this risk, but the above conditions will likely lend support to oil prices over the short-term until resolutions are manifiested.

Looking at the charts below shows that any drastic outcome could easily result in oil trading above its short-term resistance level of 122. Hurricane season is far from over and the geopolitical issues will not be easily solved which makes the outlook over the near term slightly bullish for oil prices.

Chart #1

Chart #2

Disclosures: Hillbent nor its affiliates maintains a long or short position in any of the above mentioned securities at the time of writing or publishing this report.

Comments

[CLH:]

Oil has been in a bubble and the final price will be much lower.

2008 Aug 31 09:27 AM

[WEBISKING:]

Those who bought XOM 50 Jaunary 2010 strike price calls at 29 dollars er share will soon be glad they did so

2008 Aug 31 12:08 PM

[redbaron:]

CLH: no facts, just opinions, and also no relevancy to the article.

Webi: also short on facts, but clearly very relevant to the article.

If you believe in charts, and charting tools, the above charts look bullish, which is the authors point.

2008 Sep 01 08:38 AM

[elliot_mllr:]

CLH: There is no "final price for oil".

2008 Sep 01 09:38 AM

[$HARK$:]

CLH,

this pikers hate us as we were talking Oil down for a long time.
I made a lot of money on betting against the masses,even now when Gustav is drawning all the Oil platforms in the world,price went down overnight from 118.60$ to 112.50$ now.
I made money shorting NG on the Gustav news on Thursday,Friday closed today shorts since 8.10$ at 7.80$ and even it looks stupid as NG is trading now at 7.58$.
I SHOULD SELL ALL OF YOU MORE!

2008 Sep 01 09:56 AM

[John Lounsbury:]

All those taking positions, long and short, COULD make money. There is a high probability that oil will trade below $80 and above $150 during the next twelve months. The problem is that some WILL lose money because volatility will probably be high and geopolitical shocks will be very influential and largely unpredictable. Those on the wrong side of an unexpected move usually close positions at a loss rather than hold on for a reversal.

Nimble short-term traders will do very well. Investors taking long-term positions short on oil will probably lose. Anyone who buys oil today and holds for 3 years or more will probably make a good return.

Regarding this article specifically, good job of technical analysis for the short-term trader.

$harks$ - I agree with your trading positions for the past week and at least for the start of coming week. I expect you will reverse from short to long and then back and forth several more times in the rest of 2008 if you are to maximize your success. You would do well to have weeekly technical analysis reviews, such as this article provides, to stay on the right side of trades.

2008 Sep 01 11:52 AM

[John Lounsbury:]

By the way, refer to the USO chart in the article. There is very strong support in the 70's and at 50. If reached, these are prices to take large long positions.

2008 Sep 01 11:55 AM

[Kunst:]

CLH, phinsuntanning, SHARKSH*T, Brian Pursley. Every deck has to have some jokers.

2008 Sep 01 03:09 PM

[mangolfer:]

Possibility of a global economic slowdown?? We are in it!! I've been betting against the bulls since mid July and am going to keep betting against them till the $80 range.

2008 Sep 02 07:21 AM

[jjason:]

OIL SPECULATION FOR DUMMIES

stopoilspeculationnow..../

Oil Is Political

OBAMA / BIDEN 08

2008 Sep 02 08:19 AM