Wednesday, May 7, 2008

A Larger Build in Bubblin' Crude is Welcome News

U.S. Crude Oil Inventories for the week were expected at 1.4M barrels, but came in at 5.7M barrels. That translates to a 325.6M barrel stock pile. The 4.3M barrel weekly build, much larger than expected, is welcome by most of Wall Street and consumers and we see this trend continuing. The opposite of a build is termed a "draw down", and oil needed a draw down to go higher. In our opinion, the price of oil is getting "very tired" here, and the bullish trade will begin to unravel.

Energy inflation obviously continues to be a major set back for the economy, but POTC believes it hasn't broken the consumer or Wall Street, and what doesn't kill you makes you stronger. Barring any war with Iran or other unforeseen geo-political event, we feel crude topped out in the $123 range on May 6th. A wise trade would be to short crude in the futures market, as we see this commodity accelerating downward in the weeks and months ahead. The $100 level should be broken by month’s end. In addition, we don't believe the Beijing Olympic build out strain has been factored in either, so all indicators point to lower prices ahead.

Have a fine Wednesday, the Psychology of the Call team.


Anonymous said...

Oil to $150 imo, we'll see.

Anonymous said...

july 87 puts on USO suggests the big players betting on oil going down in a couple of months.

Anonymous said...

You failed to mention the upcoming hurrican season. The downward pressure on price will continue if no direct hit occurs in the Gulf!
Good insights, gas prices are killing me, paid $70 to fill up my tank last night!!!