Yes, you read that right. I have been an oil bull for over 2 years but it is my belief that oil has reached a temporary peak. The peak was reached on 7th July 2006 at $75.78 per barrel of light sweet crude. My only reservation to this prediction is if war breaks out somewhere, or there is escalation of troubles in the middle East. Based on fundamentals, oil prices have peaked.
What this means is that prices at the pump will ease.
My prediction is based on a number of indicators:
- Slowing of the US economy. This will affect even China. US spending has fueled much of the growth in the worlds economy in services and products. A large percentage of Chinese growth is in selling products to the US. When the customer reduces buying, the shop surely will feel the pain
- Demand destruction of high oil prices is becoming evident
- Tightening of worldwide monetary policy. Reduced liquidity worldwide will keep speculation money in check
- Technical analysis of crude prices over the last two months with action on Friday 7th July critical
- Marginal increase in Supply due to high prices motivating maximization of old oil wells, Canadian Oil Sand coming online and increased drilling worldwide
The peaking of prices is ofcourse only temporary. It is still my firm belief that we are in a long term commodity bull market for at least the next 10 years. We are only in the early stages but as in all bull markets they are never without temporary set backs.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment