Crude tops up to $ 84.05 per barrel

Crude Oil topped up to $ 84.05 per barrel in New York, with the thought that Turkey might try to extinguish Kurdish fighters by invading northern Iraq. (Iraq has the world's 3rd largest oil reserves). There is always a reason for crude-oil to go bullish.

talking heads, sages and pundits said that yesterday's spike was due to shorts covering i.e. the kitchen was finally getting too hot and their positions were subject to margin calls....we'll see

The crude oil market is trading above the $136 level up +$8.80 this afternoon. The market is very close to triggering a limit up ($10) halt of trading ... The June contract is up over +14% from yesterday's low($121).

Pt emini: thanks. What symbol are you watching?

Ben

Is it just me or does anyone else see a bubble that's about to burst?

Well, if Israel, possibly with U.S. help, strikes Iran, perhaps even this weekend, oil may jump to $250 or even $300 instantly as the Strait of Hormuz gets shut down and almost no Middle Eastern oil can come to market. Then this won't seem like a bubble, it will seem like they were giving it away. Just a thought...

Nymex Crude, front month: CLN08

Normally when we see a futures market start posting limit up price moves within a parabolic rise, then we know the final blowoff phase of the trend has begun. This gives us hope that the end of the move is near, and the market will soon find a spike high in price and begin a vertical descent back down. The market will need to find this spike high quickly, some folks are suggesting the $150 level, there is nothing particularly special about the $150 level other than folks are pointing to it and talking about it... it's an arbitrary number. The concern here is what traders will do if the market blows through $150 in the next week or two.

The problem here is this price action could be the kick off of a multi-month vertical price move. An unusual surge in volume over the last three weeks suggests to me the possibility todays gap and limit move is a breakaway gap (rather than an exhaustion gap). If so, prices have a significant distance to run, in which case Jim's scenario of a 100% increase from here is possible, eventually taking prices up to the $250 level.

Setting the technical and trading scenario's aside for a moment, we also need to take a step back and look at the bigger picture which I think Jim is suggesting in his comment... from my perspective it appears there are three fundamental forces at work here:

1. The collapse of the US Dollar: since crude oil is priced in US dollars, the devaluation of the currency is steadily forcing the price of crude oil higher on the global market. The US dollar is losing value because the Fed has been pumping excessive liquidity into the US banking system and in so doing has driven US interest rates much lower than the currencies of almost all other countries (with the exception of Japan). This encourages currency traders to sell the dollar and go long much higher yielding currencies. The second force driving the US dollar lower is the US economy is rapidly weakening due to the triple effect of the ongoing credit crisis in the banking system, the collapse of the housing and real estate market, and rapidly rising unemployment. This becomes a self re-enforcing cycle as the weakening economy forces the Fed to inject new liquidity into the system and hold interest rates at 2% for an extended period of time and in so doing maintains tremendous selling pressure on the US dollar in the global currency markets. This process could easily spiral out of control from here resulting in a loss of confidence in the Fed, a run on the US dollar, and a full blown global currency crisis.

2. As Jim mentions, the geopolitical issues associated with the expansion and escalation of war in the Middle East. A war premium if you will. The clock is clearly ticking on President Bush to act on the Iran threat while he still has time. Statements from Israeli officials this week confirm they want this issue dealt with this summer (well before the November US presidential election.)

3. Simple supply and demand. Current global demand is running about 2 million barrels a day ahead of current supply. Unless someone somewhere starts pumping a lot more oil out of the ground to meet current demand, this inelasticity within the physical market will remain a steady force driving the price of crude oil higher.

I'm not an expert on this but I believe that we last saw this during the 1973 oil crises.

Look at the crash after that bubble burst:

OMG. Will the doom and gloom bear baiting spin ever cease? No one's going to bend to Israel's beck and call over Iran save the usual chest-beating posturing that occurs when wars aren't conceded as lost. China relies on 40% of its crude import from Iran, and Russia funded and built Iran's nuclear energy complex; a mercy gesture as result of the U.S. crushing Iran's chances of building its oil refinery infrastructure; with no thanks to Haliburton.

With our military over-extended and our very foundations of our out-cry free market system shook and near in shambles we're going to, again, revamp the cold war to crank the military metal industrial complex (via copper, nickel and steel stocks) to stimulate world markets' growth? Did it work in 2001 to present? Want nuclear war to make a buck? You Jesus fundies are nuts.

For Pete's sake turn off O'Reilly and kill your Bear Buddha McCain where you met him: in your head; while there's still hope.

quote:

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Originally posted by pt_emini

Nymex Crude, front month: CLN08

Normally when we see a futures market start posting limit up price moves within a parabolic rise, then we know the final blowoff phase of the trend has begun. This gives us hope that the end of the move is near, and the market will soon find a spike high in price and begin a vertical descent back down. The market will need to find this spike high quickly, some folks are suggesting the $150 level, there is nothing particularly special about the $150 level other than folks are pointing to it and talking about it... it's an arbitrary number. The concern here is what traders will do if the market blows through $150 in the next week or two.

The problem here is this price action could be the kick off of a multi-month vertical price move. An unusual surge in volume over the last three weeks suggests to me the possibility todays gap and limit move is a breakaway gap (rather than an exhaustion gap). If so, prices have a significant distance to run, in which case Jim's scenario of a 100% increase from here is possible, eventually taking prices up to the $250 level.

Setting the technical and trading scenario's aside for a moment, we also need to take a step back and look at the bigger picture which I think Jim is suggesting in his comment... from my perspective it appears there are three fundamental forces at work here:

1. The collapse of the US Dollar: since crude oil is priced in US dollars, the devaluation of the currency is steadily forcing the price of crude oil higher on the global market. The US dollar is losing value because the Fed has been pumping excessive liquidity into the US banking system and in so doing has driven US interest rates much lower than the currencies of almost all other countries (with the exception of Japan). This encourages currency traders to sell the dollar and go long much higher yielding currencies. The second force driving the US dollar lower is the US economy is rapidly weakening due to the triple effect of the ongoing credit crisis in the banking system, the collapse of the housing and real estate market, and rapidly rising unemployment. This becomes a self re-enforcing cycle as the weakening economy forces the Fed to inject new liquidity into the system and hold interest rates at 2% for an extended period of time and in so doing maintains tremendous selling pressure on the US dollar in the global currency markets. This process could easily spiral out of control from here resulting in a loss of confidence in the Fed, a run on the US dollar, and a full blown global currency crisis.

2. As Jim mentions, the geopolitical issues associated with the expansion and escalation of war in the Middle East. A war premium if you will. The clock is clearly ticking on President Bush to act on the Iran threat while he still has time. Statements from Israeli officials this week confirm they want this issue dealt with this summer (well before the November US presidential election.)

3. Simple supply and demand. Current global demand is running about 2 million barrels a day ahead of current supply. Unless someone somewhere starts pumping a lot more oil out of the ground to meet current demand, this inelasticity within the physical market will remain a steady force driving the price of crude oil higher.

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I've added Daily Notes for Crude Oil Futures (and for Gold).

Crude oil is the most well known commodity from the energy sector and is the world's most actively traded commodity. Light, sweet crude oil is preferred by refiners because of its low sulfur content and relatively high yields of high value products.