Oil Breaks Down Again

Oil moved below $90 for a brief period of time this morning, and below we provide a price chart of the commodity in 2008.  As one point, oil was up 51% year to date, but now it is down 6.33%.  After breaking below its lows from mid September, the technicals suggest further declines are still to come for oil.

click to enlarge

Comments

[Jason Rines...:]

I'll start buying when it gets to $80.

2008 Oct 06 12:35 PM

[User 257960:]

Oil may be going down, but it wll not go straight down. A check on the Bullish Percent ($BPENER) @ stockcharts.com show the extreme bearlishness and that the energy sector is in the dumsper. This is a situation that you can see another short squeeze unfold very soon. This may conincidence with a short stock market rally now that it is so oversold.

2008 Oct 07 06:53 AM

[mangolfer:]

I'll start buying at $50 maybe....

2008 Oct 07 07:09 AM

[Ferdinand E...:]

The oil price has no place to go except up. The question is when. If I were the best econometrics teacher in the world - which I probably was a few centuries ago - I would argue that our friends in OPEC have constructed a demand curve for oil, and it shows that once this finance crisis is over, then it's time to aim for an oil price of ______.

2008 Oct 07 08:10 AM

[NOWHEREMAN:]

Oil holds again, a double bottom is in place for now.

The Biggest Saudi field is being pressurized to keep output at present levels. Oil output from old, 1960s fields, has increasing amounts of water mixed in, only modern day exotic tech has been able to keep them pumping while they search for more oil.

While they have no control over higher prices, output increases are being met with internal demand + external demand, they will gladly decrease output to save it for higher price levels.

2008 Oct 07 08:32 AM

[john s. gordon:]

now if we can just export our excess CO2 to saudiland & use it for EOR in their fields....
> jack

2008 Oct 07 08:37 AM

[yank:]

Russia just reported another dismal quarter for oil production. Non-OPEC oil supplies this year will be their lowest in almost 20 years. US gasoline inventories are at a 40 year low. Simply put, OPEC has drawn a line in the sand. $90 is the new "support level" or floor that they will enforce. Many Saudis have said publicly that billions of dollars in CAPEX projects underway are only economically viable with oil at $90 or above. So you can expect another production cut at the December cartel meeting or sooner. We will not see a sustained move below $90. Oil futures have moved from contango to backwardation which is bullish for oil prices.

2008 Oct 07 10:52 AM

[NOWHEREMAN:]

I really don't understand why contango is considered to be bearish for oil but is the norm for Gold.

???

2008 Oct 07 10:58 AM

[Jason Rines...:]

Great comment. On timing, many variables now to even list all justifications but a guess is see low prices throughout this year and Q1, begin to see the effects of further currency devaluation Q2 and upwards from there. One big variable: Will oil still be pegged to the dollar after 2009? I don't think so.


On Oct 07 08:10 AM Fred Banks wrote:

> The oil price has no place to go except up. The question is when.
> If I were the best econometrics teacher in the world - which I probably
> was a few centuries ago - I would argue that our friends in OPEC
> have constructed a demand curve for oil, and it shows that once this
> finance crisis is over, then it's time to aim for an oil price of
> ______.

2008 Oct 08 12:36 PM

[NOWHEREMAN:]

Oil definitely punched through on Thursday, Where it goes, I do not have a clue.

The DOW has reached my 39.8% decline, I had expected the S&P to hit 800 and the Russell 550, Where they stop is a mystery also.

What is necessary is a heavy volume intraday reversal, I hope that occurs tomorrow because I would hate to see two days of stewing over the weekend.

2008 Oct 09 05:56 PM