As mentioned in my previous post "Natural Gas Momentum Marches on!" in this blog that even though the "speculators" have remained net long futures and option positions in NYMEX (see chart below) based on the data from CFTC as last Tuesday (July 1st), the outstanding contracts for long positions, however, have been closed out continuously in the last 5 weeks. The total contracts of long position declined from over 260,000 to
just above 210,000. At the same time period, the short positions remained at relatively consistent level of about 190,000.
The nearly $10 slide of Western Texas sweet crude in last two trading sessions (7/7 and 7/8) hardly can be explained by the popular media/talking head's hypotheses, namely dollar related trade, China/India growing demand/limited oil production capacities, mid-East geopolitical tensions etc. True, the greenback has been strengthening since ECB indicated the 25 bp increase on 7/2 might be enough to fend off inflation pressure, but the strengthening of dollar from about $1.58 to $1.56 against the Euro would be a real stretch to account for the crude movement. The notion that crude market SUDDENLY woke up on Monday and realized that global economy is slowing down or worse the global economy may be in the recession is just a laughable news media headline stories. It may sound logical and reasonable, but it may far from the true picture.
Is this just the beginning of "hot money" leaving the crude market for the summer vacation or capital rotating into alternative assets with better risk-reward outlook? We may have some indications on Wed, after EIA release its Weekly Petroleum Status Report.
7/9/08
Well, EIA weekly report came out with quite bullish bias, a huge decline of 5.8 millions barrels of crude stocks. Oil responded with initially up almost $2, it seems that raging crude bulls were going to show its muscles again like in so many previous occasions, i.e., any bullish news, rumor or stats, would propel oil to a new higher ground, to recover the $5 loss yesterday. But not today, even weakening dollar was not able to provide much to sustain the early gain. The crude oil gave back early gain and ended at flat line. Another ominous sign for oil bulls this time was that the fireworks show of long range missiles from Iran did nothing to help oil upward trajectory today. That certainly was not good news if you are oil bulls. Or this may be just the beginning that we have been long waiting for the correction of crude "irrational" run.
just above 210,000. At the same time period, the short positions remained at relatively consistent level of about 190,000.The nearly $10 slide of Western Texas sweet crude in last two trading sessions (7/7 and 7/8) hardly can be explained by the popular media/talking head's hypotheses, namely dollar related trade, China/India growing demand/limited oil production capacities, mid-East geopolitical tensions etc. True, the greenback has been strengthening since ECB indicated the 25 bp increase on 7/2 might be enough to fend off inflation pressure, but the strengthening of dollar from about $1.58 to $1.56 against the Euro would be a real stretch to account for the crude movement. The notion that crude market SUDDENLY woke up on Monday and realized that global economy is slowing down or worse the global economy may be in the recession is just a laughable news media headline stories. It may sound logical and reasonable, but it may far from the true picture.
Is this just the beginning of "hot money" leaving the crude market for the summer vacation or capital rotating into alternative assets with better risk-reward outlook? We may have some indications on Wed, after EIA release its Weekly Petroleum Status Report.
7/9/08
Well, EIA weekly report came out with quite bullish bias, a huge decline of 5.8 millions barrels of crude stocks. Oil responded with initially up almost $2, it seems that raging crude bulls were going to show its muscles again like in so many previous occasions, i.e., any bullish news, rumor or stats, would propel oil to a new higher ground, to recover the $5 loss yesterday. But not today, even weakening dollar was not able to provide much to sustain the early gain. The crude oil gave back early gain and ended at flat line. Another ominous sign for oil bulls this time was that the fireworks show of long range missiles from Iran did nothing to help oil upward trajectory today. That certainly was not good news if you are oil bulls. Or this may be just the beginning that we have been long waiting for the correction of crude "irrational" run.