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Registered User
Joined: 9/25/2007
Posts: 1,506
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In the wake of a report showing slowing growth in the US today ... both oil and gold made what appear to be profound breakouts ...
Based on the depth of the prior consolidation ... it would seem that gold might be headed up toward the $915 range ...
And oil quite possibly toward the $108-$100 range ....
Weekly crude inventories continue to contract ....
And this week's numbers are due out tomorrow ....
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Registered User
Joined: 9/25/2007
Posts: 1,506
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For oil ... I meant $108-$110 range ...
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Registered User
Joined: 12/7/2004
Posts: 393
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I've read that $120 oil may be the inflection point that finally tips our economy and the market. However the market may be telling us we're already there.
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Joined: 9/25/2007
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QUOTE (laphill) I've read that $120 oil may be the inflection point that finally tips our economy and the market. However the market may be telling us we're already there.
I've seen numbers like that from $98-$120 ....
I look at it like this ...
If it happens with any persistency ... I think $4.00-$4.25 gas will take it down ....
At $110/bbl ... and say about $15/bbl refining cost .... that's $125/bbl divided by 42 gallons/bbl ... equals ~$2.98/gal ... add to that $.50/gal for transport ... and another $.50/gal for taxes ... and we're knocking on the door ....
And this is without any refinery bottlenecks ... pipeline disruptions ... political unrest in any corner of the oil producing world ... etc ....
Even during the last "pullback" in crude prices ... the cost of crude was still actually moving higher due to the rally in the USD ....
If the USD falls back to recent lows ... as I suspect that it will ... that just adds to the equation ....
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Registered User
Joined: 9/25/2007
Posts: 1,506
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US Crude Oil inventories dropped by 4 million barrels in the past week ...
More than double the expected draw down ....
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Registered User
Joined: 12/7/2004
Posts: 393
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RC,you and I pretty much agree on this. I,m heavily invested in this sector.
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Registered User
Joined: 3/1/2005
Posts: 34
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Yes, the bullish trends in gold and oil are another statement of the bearish trend on the US Dollar, and the excess low quality credit bubble. I have been using energy and gold a dollar hedge. I like international energy and international precious metals as well. I also am long ABX.
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Joined: 3/1/2005
Posts: 34
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Oil inventories were pushed down to avoid some inventory taxes. Note the gasoline inventories were up.
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Registered User
Joined: 9/25/2007
Posts: 1,506
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QUOTE (Ralph Koozer) Oil inventories were pushed down to avoid some inventory taxes. Note the gasoline inventories were up.
I'm not sure that I understand ...
Unless the product has changed hands (ownership) ... wouldn't you owe inventory taxes on the gasoline (at a higher value) than you would on the raw crude ?
And ... if this is a tax strategy ... inventory taxes aren't "new" ... right ?
Wouldn't this be an annual event ... and as such ... factored out of by the market ?
Granted ... I'm a long way from being the brightest bulb in the pack ... but it seems to me that the refiners have been drawing down inventories ... thinking that they are going to be able to replace them at much lower rates than $90+/bbl ....
And if so ... so far ... it seems that they have been wrong ...
And current inventory levels are well below the 5 year average ....
At some point ... those inventories will have to be replaced ....
And until distillate invetories fall to a point that there is a significant increase in price that makes production of distillates from $100/bbl oil profitable ... I don't really see that the refiners have much incentive to increase any crude stocks ...
The most recent numbers that I've seen on refining margins were below $4/bbl ... when it generally takes at least $5/bbl for most to break even ....
Compared with the $35+/bbl margins enjoyed back in May of 2007 when we had a refining bottleneck ... and the $15/bbl that most seem to want to provide the desired ROI ...
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Registered User
Joined: 9/25/2007
Posts: 1,506
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So ... here we are ... a week and a half into the new year ... and crude oil inventories continue to plummet ...
Down nearly 7 million barrels this week .... a draw down that was much worse than expectations ...
Still think that this is just a year-end inventory anomaly ?
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Registered User
Joined: 3/7/2006
Posts: 244
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Looks FAR less bullish on a daily chart. Even bearish.
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Registered User
Joined: 9/25/2007
Posts: 1,506
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QUOTE (Inspector62) Looks FAR less bullish on a daily chart. Even bearish.
You may want to look into "DUG" then ...
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Registered User
Joined: 9/25/2007
Posts: 1,506
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Well ...
Gold hit 914.24 today ... that's pretty close to the $915 target ...
Oil is still a bit unclear ...
Is it a triple top ?? If so ... it certainly hasn't backed off with much entusiasm ...
Could it be an inverted H&S that we're seeing build ?
If so ... that would render a resolution in the $110/bbl range .... and would seem to be in keeping with the original consolidation target ...
Time will tell ...
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Gold seems to be the only safe heaven I expect it to continue up.
Isn't the oil inventories plummeting related to the cut in production by IRAN and the default currency accepted. OPEC is not picking up pace as promised.
Keep pushing IRAN and watch the oil and gas prices.
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